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 Friday, Nifty opened with a gap up above previous day’s range at all time high and bulls tried to push Nifty up but after testing IB high, sellers took advantage of another exhaustion of buyers nd tried to push prices down but they also were not able to take prices back inside previous day’s range and prices moved sideways there after forming a NVD down day. Also, On daily charts, friday has formed a Doji star on top which signifies indecision and struggle between bulls and bears. So, we need to see today if buyers are able to push prices above PDH to take control and bears are able to push prices below PDl to take control. Also till they keep trading inside previous day’s range, there is not much clarity and sideways move can continue.
What can be expected now:
Nifty was showing exhaustion last few days and on Friday also, after an inventory adjustment break, it still showed that exhaustion. This indicates that may be a bigger inventory adjustment break is needed before we move up futher. But, again, we need to observer prices everyday and then adjust our view as it can so happen that we continue moving sideways and then without any correction start moving up. What is important today is to watch where prices are getting accepted – above or below previous day’s range.
PDH and PDL are important levels from previous day’s range. Above PDH, bulls will be in control and we can keep moving higher and below PDL, bears will be in control and we can move dow to test the poor lows.
Trade plan for today:
Nifty is expected to open inside previous day’s range and there is not much clarity at open auction. i will look for long trades only if we trade above PDH otherwise I will be looking for short trades specially if I see another buyers exhaustion or if prices start accepting below PDL. Also, In case of short trade, we are trading against the higher trend, so we need to be cautious in taking good entry with correct position size and risk and try to trail stoploss to reduce risk.
- Short trades are risky if prices trade above PDH
- Long trades are risky if prices trade below PDH.
- Banknifty still continues to be weaker than Nifty and can drag NIfty down. But in case of any strength in Banknifty, we can see an upside move in both indices.
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.