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 Tuesday, Banknifty opened inside previous day’s range near POC and for the first 1 hour, it traded sideways with sellers and buyers both struggling to tke prices in either direction. Then immediately after completion of one hour, higher timeframe bulls entered and pushed the prices up breaking IB high with a big green candle. Thereafter, Banknifty all day moved up nicely one-timeframing upside and forming a trend day up. This shows the buyers in Banknifty were from higher timeframe and therefore , we can expect the buyers to follow through on upside today unless higher timeframe sellers enter in Banknifty and act as resistance.
What can be expected now:
Banknifty now seems to be in control of buyers and we need to see if they are able to follow through to upside or not. If not, this would mean a sideways day with a slight downward bias but acceptance above PDH can give a good directional move to upside in Banknifty.
PDH (35815) , POC (35600) and PDL (35086) are important levels from previous day’s range. Acceptance above PDH can test virgin POC at 3600 and above that poor high at 36280. Acceptance below PDL can test poor low at 34845 and acceptance below that can give a sharp fall in Banknifty.
Trade plan for today:
Banknifty is also is expected to open near PDH and we need to observe if prices are accepting above PDH or not to look for a trade. Also, looking at the strength in Banknifty yesterday, I would like to avoid any short trades in Banknifty today and will wait for sellers to show a good conviction day for me to think of shorting (i am okay to miss any good trade in Banknifty by not shorting). In case prices are accepting above PDH, i might opo for a long trade.
- No long trade if prices trade below PDH.
- Short trade at any level are risky in Banknifty, so no shorts today,
- Banknifty has shown a relative strength over nifty which can change the equation if it continues, so we need to watch if this strength continues.
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.