Abbreviations I use in the post: PDH: Previous day’s high, PDL: Previous day’s low, IB: Initial Balance or First 1 hour range, NVD: Normal variation day (one of the market profile day types), OTD: open test drive, POC: Point of control, HVN (High volume node)
Observation from previous day:
On Wednesday, Nifty opened inside previous day’s range and sellers failed to push prices down at open. Buyers pitched in from POC and took prices above PDH. As indicated in yesterday’s analysis, we have been witnessing bulls exhaustion from few days and again there was a poor trade facilitation above PDH as a result of which sellers took control which led to sharp fall and prices moved sharply down below PDL , poor low only to test virgin POC from where some buying held the fall. This formed a big trend day on downside. VWAP levels of 15700 becomes very important today. If we continue to accept prices below 15700, this correction may continue and we might move further down, but today is expiry, so there are very good chances of prices moving sideways with downward bias. Only in case of prices accepting above 15700 levels, we can see bulls taking control.
What can be expected now:
We were expecting an inventory adjustment break because for poor trade facilitation by buyers from few days and this came yesterday. Now, we need to see how much more this down swing is going to be. On daily timeframe, we had an extended upside move , so this correction is healthy for uptrend. But for intraday (which is smaller timeframe), we just need to watch if there is any buying pressure coming which can overwhelm selling pressure and till that happens, we can assume that this down swing is likely to continue. An indication to this today would be if we are able to trade above VWAP (15700 levels) or not, and in case we are, we might see a good bounce towards end of the day. If not, we will probably drift downwards with a sideways to downward move.
PDH (15815), VWAP (15700) and PDL (15595) are important levels from previous day’s range. I am bullish if prices keep accepting above VWAP but trade facilitation is again important for any long trades. Below VWAP, I am bearish but with a caution as today is expiry, so good chances of a sideways move.
Trade plan for today:
Nifty is expected to open inside previous day’s range near VWAP and we need to see if prices are accepting above or below VWAP. Today is also expiry, so I am also expecting a sideways move in case prices are not able to trade above 15700. So, I will wait for some time before taking on a trade based on my observations (probably a non directional trade below VWAP).
- Short trades are risky if prices trade above VWAP (15700).
- Long trades are risky if prices trade below VWAP (15700).
- Banknifty has broken down from sideways consolidation zone and now we need to see if it goes down further. In case it does, it will drag Nifty along with it.
Please note that this is a personal view for learning , observational and education purpose and is not a trading recommendation. Trading futures carry a risk, so you should consult a financial expert before taking any risk. Also, Nifty in above statements Indicate Nifty future for current month and not Nifty index.