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, Nifty opened above previous day’s range with a Gap up and Bulls tried to push prices further higher with open-low but these bulls were clearly not strong enough and they gave up after first 15 min. Sellers tried to take advantage of this situation and push prices back inside previous day’s range but they were even not able to close the gap and the prices ended up moving sideways forming a non-trend day but with a higher value area. Now, with these two days of non-trend day, we can see bulls exhaustion with gives a possibility of Inventory adjustment break to throw out weak buyers but till we continue moving higher, the prices are in control of higher timeframe bulls and shorting becomes risky in that case. So, its better to stayout if confusion exists today also.
What can be expected now:
Monday’s range was again above the previous day’s range. so the price acceptance favours bulls in nifty. One thing we need to observe if bulls are able to move prices above PDH and will prices get accepted at a new high or not. Also, in case prices move down, we need to see if bulls can defend the gap created yesterday or not. In case prices move down further below the gap, we can assume it to be start of inventory adjustment break, but then prices should not move back inside range again once IB low gets broken.
PDH (17428) , POC (17390) and PDL (17360) are important levels from previous day’s range. PDH is also all time high and above PDH is no trade zone. So, acceptance above PDH can take prices higher and I am expecting prices to test area between 17450-17500 in coming days. In case of acceptance below PDL, we can close the gap testing 17342 level and in case of acceptance below this, prices can test virgin POC levels at 17285.
Trade plan for today:
Nifty is expected to open inside previous day’s range and I will not be very eager to look for a trade at open auction today. I will wait and see where prices are getting accepted and in case they are getting accepted above POC or above PDH, I will look for a sellers failure or exhaustion to opt for a long trade. No trades below POC unless there is very good opportunity. Also, I will again be cautious on long today similar to yesterday and one reason for that would be if Banknifty continues its weakness. Shorts only below 17340 levels but also with a caution.
- No long trades if prices trade below POC.
- No Short trades if prices trade above POC.
- Nifty is showing relative outperformance than Banknifty , but we need to be cautious on Nifty long trades if Banknifty continues to show weakness. So, keep eye 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, Nifty in above statements Indicate Nifty future for current month and not Nifty index.