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 above PDH and buyers moved prices up immediately at open with Open drive (Open Low). This looked like a very good trade facilitation by bulls in the start but after IB range formation, there was no follow through on the upsdie and prices then moved sideways mostly near IB high forming a NVD day up but a kind of Normal day. Now, this sideways move was Bulls exhaustion but sellers were also not able to take advantage of this exhaustion and move prices down, that is why there is not much clarity today. Now, unless we break upside or breakdownside from this sideways zone, the struggle is likely to continue.
What can be expected now:
When there is a clarity and conviction missing from higher timeframes, Markets tend to become volatile and give up down moves due to news flow and this is what is expected for sometime till we have a clear direction. US markets fell yesterday and SGX is indicating negative open in morning, so we need to see if sellers take advantage of this favourable open and move prices down with good trde facilitation or they also gets exhausted after the initial momentum like Bulls on Monday.
PDH and PDL are important levels from previous day’s range. Above PDH, we can test weak high and below PDL, prices can test virgin POC and swing low.
Trade plan for today:
Prices are expected to open inside previous day range and we need to see if sellers are able to push prices down below PDL and prices get accepted below PDL or not. Open auction tardes in Banknifty are more risky, so I will wwait for IB range formation and then depending on IB placement with respect to previous day’s value area, I will look for long or short trade later.
- No long trades if prices trade below PDL.
- No Short trades if prices trade above PDL.
- In case of trade (Long or short), be cautious about exhaustion, so keep an eye on trade facilitation on either side.
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.