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, Banknifty opened inside previous day’s range and bulls pushed the prices higher immediately at open forming open-low and breaking above PDH. The prices continued to move higher and formed a NVD up day with value area moving higher. There was some selling only at the end of it from the swing high zone of 3600 but that was something expected, So prices are in control of bulls in Banknifty for now. This is slightly different from what we have observed in nifty but Nifty is also a case of bulls exhaustion and not bears dominance until we see a continued move downwards.
What can be expected now:
Today, after a late selloff, we need to see if those sellers are able to follow through to downside today and if they do, is there a buying support at some level or not. The prices are expected to be volatile at open , so we can observe the levels after the prices settle down. Any acceptance above PDL is good for bulls and acceptance below PDL will negate yesterday’s rally which is not a good sign for bulls.
PDH (35920) and PDL (35270) are important levels from previous day’s range. Acceptance above PDH can give a very good up move and acceptance below PDL can see prices testing virgin POC at 34900 and poor low at 34750.
Trade plan for today:
Banknifty is expected to open below previous day’s range prices are expected to be volatile at open. So we need to wait and let prices settle down and the observe the acceptance or rejection. I will only have a bearish view in banknifty if it decisively accepts below PDL, otherwise I will look for a long trade. Prices also have a good chance of moving just sideways, so we need to be cautious if we get an entry.
- Short trades are risky if prices trade above PDH.
- Long trades are risky if prices trade below PDL.
- Banknifty is outperforming nifty, but nifty is already at all time high whereas Banknifty is not, so this outperformance is what we expected from so many days (see earlier posts).
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.