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 inside previous day’s range and from open auction there was struggle between buyers and sellers. After IB formation, sellers tried to push prices down and tested IB low but failed to move further down. From IB low, buyers pitched in and moved the prices up above IB high and above PDH but there was poor trade facilitation and prices closed inside previous day’s range forming a NVD up day. Also, value area has moved up, so we can say that even though there was struggle between buyers and sellers, the control is still with buyers and what we need to see today is whether these buyers can follow through on upside or not. Also, there is budget today, so we can expect some volatility.
What can be expected now:
In Nifty prices are consolidating at medium 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 the follow through by buyers would be missing which can give way to inventory adjustment break due to poor trade facilitation.
PDH (17425), POC (17365) and PDL (17270) are the levels to look out for from previous day’s range. Acceptance above PDH, we can test virgin POC at 17620. Acceptance below PDL poor low we can test weak low at 17095, further down we can test weak low at 16860.
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. 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 caution for any long trades.
- 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.