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 Thursday, Banknifty opened below previous day range and bulls immediately pushed prices back inside range with open-low formation. After IB range formation, although sellers were nearly absent , the bulls also seems to be like exhausted and have not shown strength like NIfty and prices remained inside previous day’s range forming NVD up day. This exhaustion could be due to weekly expiry and if that is the case, we need to see a follow though by bulls to upside above PDH today. In case of no follow through above PDH or rejection above PDH, we need to be cautious on longs in Banknifty as sellers can take advantage of bulls exhaustion and push prices down.
What can be expected now:
In case of acceptance above PDH, prices can further move upside in Banknifty but in case of rejection above PDH or acceptance inside previous day’s range, we need to be cautious on long trades as this would mean Bulls exhaustion. But there is no point looking for short trades unless we have a very clear indication that sellers are in control.
PDH, POC and PDL are important levels from previous day’s range. Above PDH, we can test virgin POC at 37270 and below PDL, prices can test virgin POC at 36200. Inside previous day’s range , POC is important level to observe price action.
Trade plan for today:
Banknifty is expected to open inside previous day’s range and we need to see if buyers are able to follow through upside above PDH or not. I will wait and observe for clear acceptance above PDH to plan for a long trade and will ignore any trade in prices are accepting below PDH. Also , where IB range is being formed is important from directional trade perspective. Above POC will be bullish and below POC is bearish.
- No long trades if prices trade below PDH.
- No Short trades in Banknifty if prices trade above POC.
- NIfty is much stronger and is at all time high. Banknifty is relatively weaker than nifty and has to do the cachup. We need to observe if it can.
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.