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 Thursday, Banknifty opened inside previous day’s and bulls tried to push prices above PDH but failed to do so and after IB range breakout on upside, prices moved down breaking IB low and forming a Neutral day in banknifty. This was inspite of strong bullishness in other indices which shows us that prices are still in control of sellers. Also, there is a selling gap in Banknifty like Nifty which remains and until that is closed, it would be better to assume that sellers are in control.
What can be expected now:
We need to see trade facilitation by bulls. Since prices are in control of sellers right not, I am expecting prices to move down further if they manage to break and accept below PDL.
PDH , POC, and PDL are important levels from previous day’s range. Acceptance below PDL can take prices down to test poor low at and acceptance below poor low can give us a sharp move downside. Acceptance above PDH can test the selling gap and acceptance above selling gap is not good for sellers.
Trade plan for today:
Banknifty is expected to open inside previous day’s range and thereis not much clarity at open auction but in case prices break PDL at open, I migth opt for a short trade. Also if case prices trading inside previous day’s range, I might look for a short trade on bulls exhaustion. No short trade if prices start accepting above PDH but I will stay away from long trade also in that case.
- Short trades are risky if prices trade above PDH
- Long trades are risky if prices trade below PDH
- Banknifty is weaker than Nifty. So, shorting in Banknifty might be a better idea than 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, Banknifty in above statements Indicate Banknifty future for current month and not Banknifty index.