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 Wednesday, Banknifty opened above previous day’s range with a big gap up and sellers pushed the prices immediately down at open. Then, one time framing continued downside forming a trend down day and also a bearish engulfing on daily charts having negative implications. To add to it, we had a holiday and overseas market fell which would support the sellers at open today, so we can expect Banknifty to move down further, but if it dows not, the sellers need to be cautious.
What can be expected now:
We need to observe trade facilitation by sellers in banknifty today and see if sellers are able to move it down after a gap down open. There is not point of looking for a long trade till we trade below PDL.
PDH (36275) and PDL (35473) are important levels from previous day’s range. Acceptance below PDL can test gap (35350) and virgin POC at 34900 and below that poor low (35670) and below that , we can go all the way down to 34100.
Trade plan for today:
Banknifty is expected to open below previous day’s range and there will be huge volatility at open, so I will stay out at open auction. Further after some time or after IB range formation, I will look for short trades in case of bulls exhaustion or false breakouts. I might also choose to stay out of Market today and just observe, But no long trades till we trade below PDL . Even if those long trades in such trades look good in hindsight, this would mean that i am trying to catch falling knife which is not good for my trading in long term
- Short trades are risky if prices trade above PDL
- No long trade if prices trade below PDL
- Banknifty is looking good for a fall , so lets see the trade facilitation by sellers.
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.