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, Nifty opened above PDH with a gap up and bulls tried to take prices up but after IB range formation and test of IB high, sellers too control and moved prices down forming a trend down day. Towards the end of the day, there was again attempt of buying the dips but this time sellers were more determined to keep prices down. Now, with overseas market falling when we had a holiday, we are expected to fall and catch up, but this correction will be healthy for Long term uptrend as we have see many exhaustions of Bulls from few weeks and always talked about impending corrections. But for Intraday, we trade in direction of the lower timeframes and that direction would be short for today till we trade below PDL (16550).
What can be expected now:
We can expect correction and down move in Nifty but till we stay above 16000 levels, long term uptrend in Nifty is intact. Also, there will be attempts of Buying the dips , so I do not expect the down move also to be smooth unless sellers take absolute control. But having said that, there is no point catching a falling knife.
PDH (16690) and PDL (16550) are important levels from previous day’s range. Below PDL, we might find a little support at virgin POC of 16335 and 16250 and below that, we might test the gap at 16162-16185.
Trade plan for today:
Looking at SGX nifty, Nifty is expected to open below PDL with a huge gap down 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 Nifty in case of bulls exhaustion or false breakouts. There type of big gap open days are difficult to trade for Intraday trader as the move already happened at Open and mostly all timeframes get involved leading to volatility, So I might also choose to stay out of Market today and just observe, But no long trades. 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
- No long trades if prices trade below PDL.
- Short trades are also risky, so wait for clear exhaustion and trade with less position size.
- Watch out for Banknifty. Banknifty should support Nifty in moving down, else be careful.
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.