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, Banknifty opened inside previous day’s range and buyer’s tried to push prices above PDH but failed. The responsive sellers from PDH pushed prices back down but they also were not able to break PDL. There was a NVD down day in banknifty but this was an inside day, but value area has moved lower hinting the end of upmove. The interesting thing to note here is that Banknifty is relatively stronger than Nifty but as we are expecting for Nifty to move down, banknifty will be also in sellers control if that happens. Only thing is Banknifty might be less weaker than nifty in this down swing (correction). So, we need to observe price action and see if things are happening as per our observation and then look for an opportunity to trade. But, in case our observation is right, there would be better short trades in nifty than banknifty.
What can be expected now:
Similar to Nifty, we might see a down swing in Banknifty but I am expecting area near 34000 to price support to Banknifty in coming days. But for shorter timeframe, till we keep accepting below previous day’s range, we need to only look for short trades.
PDH (35460) , POC (35125) and PDL (35000) are important levels from previous day’s range. Price acceptance below POC is not good for buyers and we will see HVN (34770) and swing low (34450) getting tested. Price acceptance above POC is not good for bulls.
Trade plan for today:
Banknifty is expected to open below previous day’s range with a gap and there is no clarity at open action due to gap, so we need to wait for prices to settle down to look for intraday trades. Also, I will be looking for only short trades if prices accept below PDL but a caution today is that there is expiry, so we can expect a dull move after the initial volatility is over. No trades, if price trade above PDL.
- Short trades are risky if prices trade above POC.
- Long trades are risky if prices trade below POC
- Banknifty was relatively stronger than Nifty. Nifty is at all time high is not showing correction (down swing), so if Nifty moves down, Banknifty will also move down but might move down with less conviction. If that happens, it will indicate us that this correction is just a pullback.
- Today is expiry, so beware of that.
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, Banknifty in above statements Indicate Banknifty future for current month and not Banknifty index.