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 Tuesday, Nifty opened with a gap up above PDH and made a new all time high. But again buyers were not able to show a good trade facilitation upside and Nifty moved sideways forming non-trend day. Now, even though trade facilitation was poor, the value area formed upside and sellers were not even able to test PDH which shows weakness of sellers. But then , another exhaustion of buyers is not good for upside movement and i this continues, we might see another inventory adjustment break and bigger one this time. But till value area keeps moving up, there is no point looking for short trades or being bearish. ONly we need to be cautious about bullishness and observe price action carefully.
What can be expected now:
Yesterday was a non-trend day in Nifty formed at all time high. This can be exhaustion of bulls or absorbtion of supply by bulls. We will have this clarity only once prices start accepting above of below previous day’s range, so that is what we need to watch today – Whether prices are accepting above or below previous day’s range.
PDH (15910) and PDL (15850) are important levels from previous day’s range. Acceptance above PDH should move prices higher and in case of acceptance below PDL, we need to be cautious about longs.
Trade plan for today:
Nifty is expected to open inside previous day’s range near PDL levels and we need to observe whether prices are getting accepted or rejected below PDL. I will opt for a long trade in case prices get rejected below PDL. In case of acceptance below PDL, i will wait for sometiem to see bulls exhaustion adn then only opt for a short trade if i get a good chance, otherwise not. The reason is value area is moving up even if it is poor trade facilitation. Short trades are against the trend and risky.
- Short trades are risky if prices trade above PDH.
- Long trades are risky if prices trade below PDL.
- Banknifty has started showing some relative strength to Nifty. So we need to see if that continues today or is was just small timeframe bears covering up shorts in Banknifty. strength in Banknifty is good for long trades in Nifty.
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.