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 Friday, Nifty opened below previous day’s range with a big gap due to bearish ness in overseas market. This would have helped sellers who took prices down on the day before. This gap down was met with a buying which was expected as all dips are being bought on Nifty from last few weeks but this buying was not able to close the gap. Also, in spite of a favourable open with a gap down, sellers were not able to push prices further down and market moved completely sideways after IB range formation and closed as a Normal day. Now, this sideways move shows lack of conviction from both buyers and sellers but this all price action happened below previous day’s range, so it gives advantage to sellers. This would mean the sideways move is more like a distribution till market proves us otherwise (by accepting above previous day’s range and moving up).
What can be expected now:
In case sellers have more control than buyers , we can expect sellers to move prices down below PDL or at least sideways indicating more distribution is left. But in case prices start moving upside, this would indicate sellers are not in control and will raise question on sideways movement of Friday being a distribution. Also, even if it was distribution, if prices accept above PDH for a longer time, this distribution can be because of lower timeframe participants which might cover up their shorts later giving more upside push to market . So, whether we accept above PDH or get rejected and move back inside previous day’s range is the key.
PDH (16503), POC (16440) and PDL (16341) are important levels from previous day’s range. Above PDH, there are many resistances we can test like the gap zone (16548- 16503) and single print near 16610 levels from where we can see selling but acceptance above these levels will indicate more bullishness. Below PDL, we can go and test virgin POC at 16250 and then buying gap at 16160-16185 levels.
Trade plan for today:
Looking at SGX nifty, Nifty is expected to open with a gap up above PDH and there is not much clarity at open and many timeframes will be involved. What we need to see if that if prices are accepted above PDH or if they get rejected above PDH and are pushed back inside previous day’s range. Above PDH is bullish and below PDH is bearish for Nifty. So, I will wait for IB range formation and then decide on trades. Longs above PDH and short below POC will be my criteria if I get a good entry, otherwise will stay out.
- No long trades if prices trade below PDH.
- No Short trades if prices trade above PDH.
- Friday, we opened gap down and today, we are expected to open gap up due to overseas sentiments. So, not much clarity for now.
- Watch out for Banknifty. Banknifty did broke down on Friday but took support at a good point, so PDL is very critical for Banknifty.
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.