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, Nifty opened above PDH, tested PDH at open and inititive buying took the prices up in the start with OTD up forming a large IB range. This looked like a very good trade facilitation by bulls 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 and move prices down, that is why there is not much clarity. Also, Monday move gave us a swing low on daily charts but that swing low is not a very good rejection, so prices might likely test it again in coming days.
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 poor high and below PDL, prices can test virgin POC and swing at 17335.
Trade plan for today:
Prices are expected to open inside previous day range but near PDL and we need to see if sellers are able to push prices down below PDL and prices get accepted there. I will wait for sometime to observe the price action near PDL and then look for a short below PDL if I find a trade. In cse of rejection below PDL, I will avoid short trade at open and then will wait for IB range formation but no long trades at open. After IB formation, we need to look at IB placement with respect to previous day’s value area to determine if there is any trade and direction of that trade.
- No long trades if prices trade below PDL
- No Short trades if prices trade above PDL.
- Both Nifty and Banknifty moved up on Monday but after the initial move, there was visible exhaustion in Buyers. So, as of now, we can say that both buyers and sellers do not have conviction to move markets in one direction. So, lets see if any one side overcomes other,
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, Nifty in above statements Indicate Nifty future for current month and not Nifty index.