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 tested PDL. There was a responsive buying in the start which tried to take prices up but they were only able to test POC after which sellers took control. Sellers took prices below PDL to close at low point of the day forming a NVD down day with value area also moving down. Now, control seems to be with sellers and we had been warning about the bigger inventory adjustment break due to poor trade facilitation from buyers. Still, anything can happen in markets but now the probability of prices going down are higher and we might see a good support only at 15300-15400 levels. On higher timeframe, we will still remain in uptrend and this correction (or small pullback of 400 points) would be very healthy for uptrend , as we were witnessing buyers exhaustion are higher levels from almost few weeks. In case prices do not move further down, again , we will have no clarity and again buyers might face exhaustion.
What can be expected now:
Yesterday, prices accepted below PDL and this showed that the non-trend day at the top was exhaustion of bulls. Now, yesterday’s POC level (15800) is also HVN, so sellers have to keep prices below that level to be in control and then, we expect prices to move further down. Also, today is expiry, so we might see volatility and a sideways move in case of poor trade facilitation. Any price acceptance above 15800 is not good for sellers.
PDH (15885), POC (15800) and PDL (15765) are important levels from previous day’s range. Acceptance below PDL should move prices lower to test virgin POC at 15735 and acceptance below 15735 can push prices further down to test poor low near 15600. Acceptance above PDL is not good for sellers and we might test POC levels of 15800 in that case.
Trade plan for today:
Nifty is expected to open below PDL with a big gap down as indicated by SGX nifty and there is no clarity at open auction. We have bearish view if prices trade below PDL but a huge gap brings a lot of volatility and uncertainty, so we need to wait for prices to settle down and look for a good opportunity. But, I would be looking only for a short trade today if prices continue accepting below PDL. In case prices move back inside previous day’s range, I will ignore any short trades or any trades.
- Short trades are risky if prices trade above PDL.
- Long trades are risky if prices trade below PDL.
- Today is expiry, so prices are expected to be volatile in start and then move sideways as a result of expiry, so we need to be cautious.
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.