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 range and initiative buyers moved price above PDH but there was no follow through after open and prices came down to test area near POC. Though there was a buying again from POC which tested IB high, bulls again failed to give a follow through above IB high and then sellers dragged the prices down but close was still above PDH. These was a clear lack of strength from Bulls, but bears were also not able to take advantage of this weakness so if buyers were poor, sellers were more pathetic. The day formed NVD up day and the value area has moved up and this can be seen as acceptance of prices at higher levels. So, for now, Bulls are in control but continued exhaustion can become a problem for bulls.
What can be expected now:
With prices making a high in Nifty and then consolidating at higher levels. we need to see if bulls can follow through on upside above PDH or not. Clear acceptance above PDH can give a good move upside but failure to trade above PDH can result in a sideways to downside move in Nifty as in that case it will be another day of poor trade facilitation.
PDH (18120), POC (18062) and PDL (17995) are the levels to look out for from previous day’s range. Above PDH, we can test poor high at 18152 and further go above it to test levels near 18350. In case of acceptance below PDL, we can expect price to virgin POC at 17837.
Trade plan for today:
Nifty is expected to open above PDH and in case of a Gap up, we need to wait for clear price acceptance for a long trade. Also, in case of OTD up at PDH, we can opt for a long trade but no long trade at open if prices trade below PDH. Later we need to observe is whether prices are getting accepted or rejected above PDH and then look for a good long entry in case of acceptance. There is no point of shorting above PDH and similarly there is no point of taking a long trade if prices trade below PDH. Acceptance inside range can be a sideways day which would be a no-trade day.
- No long trades below PDH.
- No short trades above PDH.
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.