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, Banknifty opened near PDH and after testing PDH, bulls tried to push prices up above PDH. At open, it was OTD up and looked bullish but after IB range completion, bears/sellers pushed the prices back inside previous day’s range with good momentum. Although, sellers were not able to push prices below previous day’s range or PDL, the prices never recovered back from the selling and traded inside previous day range for rest of the day forming a NVD down day. Now, with Nifty marking a new all time high, there is a clear underperformance in Banknifty and also, we have a strong seller sitting at PDH. SO, unless prices trade above PDH in Banknifty, long trades are risky. Also, there was a good sideways move for second half on Friday and we do not know if that is accumulation or distribution, so we need to observe a follow through whcih will give us a clue. So, no short trade if sellers are not able to follow through downside.
What can be expected now:
In case of acceptance above PDH, prices can further move upside in Banknifty as that would mean the sellers who sold on friday at top and no longer active. Prices accepting below PDL is not good for bulls as that would indicate the sideways move was distribution, but in case prices stay inside previous day’s range, there is no clarity in Banknifty.
PDH (37250) , POC (36925) and PDL (36666) are important levels from previous day’s range. Above PDH, we can test all time high in Banknifty at 37750 and below PDL, prices can test weak low at 36500 and then test virgin POC at 36200. Inside previous day’s range , there is not much clarity but POC is important level to observe price action.
Trade plan for today:
Banknifty is expected to open inside previous day’s range and there is no clarity at open auction. We need to see if buyers are able to follow through upside above PDH or not. Same with sellers and we need to see if sellers are able to follow through to downside or not. SO, I will wait and observe prices action in Banknifty for some time and take trade only once I have some clarity. No trades if prices stay inside previous day’s range.
- No long trades if prices trade below PDH.
- No Short trades in Banknifty if prices trade above PDL.
- 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.