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 bulls pushed the price above PDH at open but after IB range formation, there were unable to push prices further up and Prices consolidated within IB range forming a Normal day in Banknifty. The point to notice is that sellers were also not able to push prices below IB low and the prices closed above previous day’s range with value area also shifting up. So, in Banknifty we can say that higher prices are being accepted unlike Nifty where higher prices are rejection. So Bulls have the upper hand in Banknifty but with less clarity as Nifty is not supporting this. So, it becomes important for bulls to give a follow through to upside in Banknifty.
What can be expected now:
We need to see today if bulls are able to take prices above PDH in Banknifty or not. In case there is bulls exhaustion, we need to see if sellers are able to take advantage of it and push prices below PDL or not. Prices trading within previous day’s range will give no clarity on direction.
PDH (38400) , POC (38222) and PDL (37970) are important levels from previous day’s range. Above PDH in uncharted territory and Bulls can take prices higher. Below PDL, prices can test weak low at 37715 and below it, virgin POC at 37175.
Trade plan for today:
Prices are expected to open inside previous day’s range and there is no clarity at open auction. Also, there will not be much clarity if prices continue to trade within previous day’s range, so I will stay out in start and will re assess the market after IB range formation. In case prices trade, above PDH, I might look for a long trade and in case prices trade below PDL, I might look for short trade, but I will stay out of Banknifty if prices trade within previous day’s range.
- No long trades if prices trade below PDL.
- No Short trades if prices trade above PDH.
- Nifty had a clear rejection but in Banknifty the value area has moved up. This means both indices are not in sync which adds up to the confusion. SO, its better to be cautious or stay out till this confusion resolves.
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.