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 Tuesday, Banknifty opened inside previous day’s range near PDH and sellers immediately pushed prices down. There was some buying at PDL but its was not strong enough and sellers pushed the prices further down beyond PDL giving a nice down trend day. The control for the entire day was with sellers but the only surprise was the big move in the last hour which could have happened due to short covering but this move was so big that it has put the prices back inside previous day’s range. So, we need to be cautious about it. As of now, there is not much clarity and we need to observer prices action today to get more clues as to what happened in the last one hour. The uncertainty will continue if prices trades within previous day’s range but acceptance beyond range will give us clarity on the direction whether acceptance is above range or below range.
What can be expected now:
Yesterday was a big range day, so prices are likely to trade within previous day’s range but a break above PDH or a break below PDL can give a good directional move in that direction. Since we are in downswing now, even if price trades within range, longs trades would be risky as they are opposite to shorter trend until prices are clearly accepted above PDH which changes the trend.
PDH (38400) , POC (38070) and PDL (37350) 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 37175 and below it, swing low at 36600.
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 below POC, I would be looking for a shot trade and in case of prices accepting above POC, i will probably stay out.
- No long trades if prices trade below POC.
- No Short trades if prices trade above POC.
- Yesterday both Nifty and Banknifty moved down but there was a strong rejection from lows towards the end which led to a sharp rally. Now, we need time to observe today what that rally meant. One thing is sure that volatility is rising and rising volatility is not good for bulls.
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.