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, Nifty opened near to PDH and though there was some selling at start, the sellers were not able to push nifty below the last close and buyers pitched in and moved prices above PDH and above IB high. The day ended as NVD up day at a new high. The trade facilitation by bulls was not very good but yesterday was also expiry, so it can be due to that. Still, we are not very clear on whether this sideways move is reaccumulation or distribution and therefore today, what we need to observe is whether bulls are able to give a follow through to the upside or not. Also, acceptance above PDH is must and in case of rejection above PDH, there could be a possibility of a false breakout which could be a test of highs (upthrusts).
What can be expected now:
Last few days have been completely sideways after a breakout in nifty to new highs. Too much sideways move would tend towards buyer’s exhaustion and we are slowly moving towards exhaustion giving more posibility of correction unless bulls can mark prices up and sustain. In case they are able to mark price up and sustain, we might see a good rally on upside.
PDH and PDL are important levels from previous day’s range. Acceptance above PDH can give a good move upside to a new high and acceptance below PDL can go and test virgin POC and below that, the buying gap.
Trade plan for today:
Nifty is expected to open inside previous day’s range near PDH and there is no clarity at open auction. Though it looks like breakout but looking at trade facilitation of buyers, I am not having a conviction for long side, Having said that, If prices accept above PDH, there is no poin looking for short trade and I will look for longs. Below PDH or in case of rejection above PDH, I will look for short trades but now a days, we have to be cautious on short trades and all dips are being bought. The clue would be to book partial profits in case of favourable moves and look for sellers exhaustion to exit short trades.
- No long trades if prices trade below PDH
- No short trades if prices trade above PDH.
- Today and Monday (2 days) should give us a direction and clarity on trades. So ,in case of confusion, its better to stay out or trade with less position size.
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.