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 and after an OTD up at PDH, Nifty moved up with one time framing. This was surprising after we had seen lot of exhaustion by bulls but the trade facilitation by bulls yesterday was very good, so this changes the equation in favour of Bulls and this sideways consolidation can be seen as absorption of supply. But since, this came as surprise, we need to follow through to upside by bulls as confirmation that this breakout is valid. Also, Nifty broke to all time high yesterday with this up move and the breakout was a good one, so until we stay above 16000 levels (or PDL), there is no point looking for short trades. Continued acceptance above previous day’s range can give another move upside but usually after such a good rally, its time to take some rest. Also, we should not trade below PDL otherwise, this all breakout will be counted as false breakout and the story will change.
What can be expected now:
Now with Bulls dominating, we need to observe price action and look or opportunities on the log side. Also, remember not to try catching a running train and wait patiently for right opportunity. POC is also a crucial level which can act as very good support in nifty. Price trading above POC or PDH is bullish, below POC and above PDL is sideways and below PDL is bearish.
PDH (16162) , POC (16034) and PDL (15914) are important levels from previous day’s range. Acceptance above PDH can give a good move upside and acceptance below PDL is not good for bulls and it will then mean yesterday’s move was a false breakout.
Trade plan for today:
Nifty is expected to open again above previous day’s range with a good gap and there is not much clarity at open auction because of the gap. But if prices sustain above PDH and accepts there showing bears exhaustion or absence, we can plan a long trade. Even if prices move back inside previous day’s range, I will be looking for a long trade till prices trade above POC but I will ignore any trades below POC levels.
- Nifty has a decent breakout, so short trades are very risky above PDL.
- Long trades are risky if prices trade below POC as this means the follow through is missing.
- Nifty is at all time high and Banknifty has to catch up, so a long trade in Banknifty can be more rewarding.
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.