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 PDH with a gap up and bulls tried to take prices above all time high at open but failed and sellers pushed the prices back inside previous day’s range till POC but after testing POC, sellers were unable to push prices further down and prices ended moving sideways near PDH for remaining of the day. The value area has moved up , so bulls are still in control but if we do not accept above PDH and go up today, this sideways movement will move towards being exhaustion rather than absorption of supply. So, for bulls to remain in control, they need to move prices up.
What can be expected now:
We need to see today if Banknifty is able to make a new all time high and sustain at higher levels. Acceptance above PDH is good for bulls but any rejection above PDH is not good for bulls.
PDH (381800 , POC (37875) and PDL (37720) are important levels from previous day’s range. Above PDH, prices can test all time high levels and make a new high in uncharted territory and below PDL, prices can fall to test virgin POC at 37170.
Trade plan for today:
We need to see where Banknifty opens and if it opens above PDH, whether prices are accepted or rejected above PDH. So, may be, I will wait for IB range completion to decide on direction and trade. There is no point of shorting above PDH and similarly there is no point of taking a log trade if prices trade below PDL. Acceptance inside range can be a sideways day which would be a no-trade day.
- No long trades if prices trade below PDL.
- No Short trades if prices trade above PDH.
- NIfty and Banknifty are now at all time highs together which is very good for bulls. A long trade would be easy to plan if prices show acceptance of new highs in both Nifty and Banknifty, otherwise if any one of them do not show higher level acceptance, we can stay out of long trades.
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.