Pre-Market Analysis: Nifty Future – 29th Sep 2021

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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, Nifty opened inside previous day’s range near POC and after some initial struggle between buyers and sellers , prices broke PDL after IB range formation and continued downwards below PDL to close the buyer’s gap. The control for the entire day was with sellers and this was also the follow through that we expected in case higher timeframe was selling but the only surprise was the big move in the last hour which could have happened due to short covering. Now the question is who covered these shorts and whether the higher timeframe is still interested in moving prices down. There is no clarity as of now , so we need to observer prices action today. There is nothing certain 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 (17900) , POC (17720) and PDL (17585) are important levels from previous day’s range. Above PDH is the rejection zone till all time high but acceptance above it is bullish and price can still rise. Below PDL, prices can test virgin POC at 17423 levels.

Trade plan for today:

Prices are expected to open inside previous day’s range and we do not have much clarity on open auction till prices break either PDH or PDL decisively. In case , prices fail to break beyond previous day’s range at open, I will wait for IB range completion and then would look to trade extremes but my preference would be towards short if prices trade below POC levels. Above POC, I might choose to stay out of trade unless there is a very good opportunity.

Some cautions:

  1. No long trades if prices trade below PDL.
  2. No Short trades if prices trade above POC.
  3. 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.

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