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 above previous day’s range with a gapup and after a test of PDH, bulls tried to take prices further up but failed. After IB range formation, Sellers entered and pushed the prices back inside previous day’s range but they also failed and prices closed just above PDH. So, friday was a day where sellers showed some strength after being defeated by bulls continuously for last two days. But sellers were not able to close prices below PDH and even though it was a NVD down day having bearish indication, the value area actually moved upside. So, the control is still with bulls and even if we move further down from here, it can be viewed only as a pull back.
What can be expected now:
For today, what we need to see is if sellers can push prices below PDL and in case they do, will they get rejected or exhausted or is the trade facilitation good on downside.
PDH . POC and PDL are important levels from previous day’s range. Above PDH is uncharted territory and acceptance above PDH can move prices up and below PDL, prices can test vrigin POC at 36800.
Trade plan for today:
Banknifty is expected to open belowprevious day’s range with a gap down like Nifty and there is no clarity at open auction. We need to wait for IB range and then look at where IB range is formed and then take trades accordingly. n case if there is rejections of sellers at any point of time, I might opt for a long trade but not if prices start accepting below IB low later in the day.
- No long trades if prices trade below IB low
- No Short trades if prices trade above PDL.
- Nifty and Banknifty both showed good movement upside and previous two days and friday can be viewed just as a pause. But we need to watch trade facilitation by sellers today.
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.