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 inside previous day’s range and unlike Nifty, sellers immediately took control of Banknifty and pushed the prices continuously towards PDL in IB range itself but what happened after IB range formation is interesting. For the entire day, prices just moved sideways breaking IB low, formed a NVD down day, but sellers were not able to test PDL. SO, this sideways zone becomes another interesting question – accumulation or distribution?. Today would be interesting in Banknifty as we need to observe if sellers are able to follow through to downside or not. Weakness in Banknifty might also drag Nifty down. But, if sellers are not able to follow through downside and prices gets rejected below PDL, this would give a good chance for bulls to act in banknifty and if they can push prices above POC, we can accept a short covering and good move on upside. So, banknifty would be interesting today to observe.
What can be expected now:
In case of acceptance above PDL, prices can further move down in Banknifty and can test weak lows but in case of rejection below PDL, we can expect bulls to take control. If nothing happens, then another sideways day is a good possibility in Banknifty.
PDH (37035) , POC (36800) and PDL (36690) are important levels from previous day’s range. Above PDH, we can test swing high (37250) and above that, all time high in Banknifty at 37750 and below PDL, prices can test weak low at 36500 and acceptance below that is not good for bulls and we can 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 sellers can push prices below PDL or not and if buyers can defend the low prices. I am not looking for any short trade in Banknifty unless there is a clear acceptance below PDL and in case of any rejection below PDL, I will look to go long in Banknifty. But in case , Banknifty starts moving sideways, its better to be cautious and avoid trades.
- No long trades if prices trade below PDL.
- 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. Also, Banknifty looks like in grip of sellers as they are not letting prices move up. So, until they are there , we need to be cautious on 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, Banknifty in above statements Indicate Banknifty future for current month and not Banknifty index.