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 below previous day’s range with a gap down and though sellers tried to move prices further down in start, buyers pitched in and the prices ended up moving almost sideways with a slight range extension above IB high forming a NVD up day. Even though prices were supported by responsive buyers, they were not able to close above PDL and this shows the low conviction which both buyers and sellers have. Now since, value area has moved down, we can say prices are in control of sellers but that is valid only if we keep trading below the consolidation sideways zone of last week or 37800 levels approximately. In case prices accept above 37800, sellers are likely to give up control to buyers.
What can be expected now:
We are expecting prices to open near PDH and we need to see if prices are accepted or rejected if they test PDH. In case prices trade above PDH and are accepted there, we are likely to test 37800 levels and that level is important from higher timeframe perspective. In case prices fail to trade above PDH , we can say that sellers are still in control and there is no point looking for a long trade in that case.
PDH (37420) and PDL (36950) are important levels from previous day’s range. Above PDH, we can test virgin POC at 37800 level and below PDL, prices can test swing low at 36600.
Trade plan for today:
Prices are expected to open near PDH and there was responsive buying from lower levels on Friday, so we need to see whether this responsive buying was strong and if they can push up the prices and trade above PDH. In case they are not able to, I will probably look for a short trade. I am not bullish on market is prices trade below 37800 levels and I will turn to bullish only on acceptance above that. In case of no clarity and volatile moves at open, its better to stay out and wait for IB range to plan a trade.
- No long trades if prices trade below PDH.
- No Short trades if prices trade above PDH.
- Both Nifty and Banknifty moved down on Friday but there was no big pressure from the sellers , so we need to see if buyers are able to take advantage of that today or if they are also weak.
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.