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 above previous day’s range with a gap up and bulls tried to push price up. But this was kind of overextended rally after a 250 points uni-directional move in Nifty on Monday. So, After IB range formation, bulls were exhausted and sellers took control of that situation and pushed prices down closing the gap and forming NVD down day. One thing to note is that value area has formed upside, so this is a confirmation that the pullback might be over and we might start moving up but tomorrow is Monthly expiry, so prices can move sideways in case option writers dominate today and tomorrow.
What can be expected now:
On higher timeframe (daily charts), I am bullish on Nifty but we can expect a sideways move today due to monthly expiry tomorrow , till prices accept between PDH (15875) and Trend day VWAP (15640). Acceptance beyond this range can give us a move in that direction and it will indicate that option sellers are not in control. IN case of acceptance below 15600, I will reconsider my bullish view on nifty.
PDH (15875), POC (15845) and PDL (15750) are important levels from previous day’s range. Acceptance above PDH can take prices to test all time high at 15910 and acceptance below PDL can take prices to test Trend day VWAP at 15640 and virgin POC at 15600.
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 be looking for a mean reversion trades at extremes but I would be more comfortable with long trades rather than short trades due to my overall bullish view in Nifty. In case prices move sideways, I will probably stay out of market in case there is no good opportunity.
- Short trades are risky if prices trade above PDH (15875).
- Long trades are risky if prices trade below 15640.
- Tomorrow is monthly expiry, so we can expect sideways movement and premium erosion.
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.