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 Monday, Nifty opened with a gap down below PDL and buyers tried to push prices back inside previous day’s range taking opportunity of lower prices but were not able to and prices moved down after testing PDL. The sellers moved the prices down immediately testing the poor lows bewlo PDL from which again a strong buying came. Now, there was a big IB range formed with strong responsive buying at IB low, so this indicated a Normal day formation. Now why a Normal day happens is because a higher timeframe pushes the prices in their direction at open itself whcih is due to some overnigth news or event. Nifty looks like the same case and in later half buyers further pushed prices up and back inside previous day’s range and closed near PDH forming a big NVD up day and bringing price back near the levels of previous day’s close.
What can be expected now:
Now, yesterday looks like an event based down move which was quickly bought. Also, we were expecting a correction (inventory adjustment break) again if bulls show exhaustion again. Now this yesterday’s price movement can be taken as the inventory adjustment break or not is the question. Fro getting the answer, again we need to look at trade facilitation by bulls today and in coming few days. So, if Buyers manage to move prices up and show a good trade facilitation on upside, we can consider yesterday’s down move as another IAB throwing weak buyers out, but in case we see buyers exhaustion again, we need to be cautious again.
PDH (15848) , POC (15728) and PDL (15630) are important levels from previous day’s range. Acceptance above PDH should move prices higher and acceptance below POC is not good for bulls.
Trade plan for today:
Nifty is expected to open inside previous day’s range near PDH levels and we need to see price action if prices test PDH (acceptance or rejection). I will look for a long trade in case of acceptance above PDH but if prices continue trading inside previous day’s range, I will just observe and probably will not take trade unless I get a very good opportunity.
- Short trades are risky if prices trade above PDH.
- Long trades are risky if prices trade below POC.
- Banknifty still continues to be weaker than Nifty. This is been the case from some days whcih adds to bulls exhaustion in Nifty. So , for nifty to move up, banknifty has to start showing more strength, otherwise we need to be cautious on any upmove of Nifty if Banknifty is not supporting.
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.