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 near PDL and after a test of PDL, Responsive buyers pitched in and moved the prices up to test POC levels. Usually, this rejections of Initiative selling is a good indication of sellers not in control but yesterday, sellers entered at POC and then pushed prices again down below PDL/IB low to close at the bottom forming Neutral extreme down day. This movement now tests the breakout level in the daily charts also and any acceptance below PDL (37140) will suggest this was a false breakout. Like POC is important in Nifty to judge who is in control, buyers or sellers, similarly PDL is a level to look for in Banknifty. Acceptance below PDL is bearish, above PDL means sideways and above PDH means bullish.
What can be expected now:
After a big move down yesterday, today can be a sideways day if prices fail to break PDL but if prices start accepting below PDL, this could be another down day in Banknifty. So, we need to watch price action at PDL.
PDH (37885), POC (37600) and PDL (37140) are important levels from previous day’s range. Above PDH, prices can test swing high at 38220 and below PDL , prices can test virgin POC at 36770.
Trade plan for today:
Banknifty is expected to open inside previous day’s range and there is not much clarity at open auction. What we need to see today is if sellers are able to push prices below PDL and sustain. If sellers are able to push prices below PDL and sustain, then i will look for a short trade if i get a good entry point. Acceptance between POC and PDL will most likely result in sideways move but in this case, I will probably ignore long trades and again might look for short trade if I get any good opportunity.
- No long trades if prices trade below PDL.
- No Short trades if prices trade above POC.
- Yesterday was a second day of down move and both of these days were big moves in nifty. So, we need to be cautious on longs till this volatility settles down.
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.