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 Monday, Banknifty opened above previous day’s range with a gap up due to bullishness in overseas market but sellers immediately pushed the prices back inside previous day’s range. After a test of PDL, some buyers pitched in and supported the fall but they were not able to take prices above PDH and prices ended up moving sideways forming a NVD down day with value area overlapping. So, this was a sideways day in banknifty and there is not much clarity now also. This confusion will continue till we have a decisive move in one direction. ON higher timeframe, after a breakdown from sideways range, Banknifty is accepting prices below that which is favourable to sellers but we need to watch if the prices continue down from here or come back up in the previous sideways zone.
What can be expected now:
Similar to Nifty, there seems to be lack of Interest in both Buyers and Sellers in moving prices, so until that resolves, we might continue the same sideways trend and the key to trading these markets would be mean reversions but this is not easy as we need to identify levels properly and in case of favourable move, keep on booking profits. But in case markets shows a decisive move in one direction which can be observed from price accepting beyond range and one time framing, then we can align our self in that direction.
PDH (35400), POC (35150) and PDL (34850) are important levels from previous day’s range. Acceptance above PDH can fill gap zone at 35475 and if prices accept above that, we can also test VWAP levels 35800.Below PDL, we can test weak low of 34670.
Trade plan for today:
Looking at SGX nifty, Banknifty is also is expected to open with a gap up 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 POC is bullish and below POC is bearish. I will wait for IB range formation and then decide on trades. Longs above POC and short below POC will be my criteria if I get a good entry, otherwise will stay out.
- Short trades are risky if prices trade above POC
- No long trade if prices trade below POC.
- Also, watchout for Nifty as it is near all time highs. any good bullishness in Nifty can eventually pull up Banknifty also, even though Banknifty looks like in control of sellers for now.
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.