BankNifty Swing

Here is a chart of the BankNifty spot showing moves of the index in intervals of 30 minutes each from 20th of March to the close of trading on Friday 6th May.

BankNifty spot :

For purposes of clarity we have subdivided the chart into three zones according to the Steidlmayer distribution process. The three zones are the imbalance region A, which is the New IPM, the balancing of B region and the third region C which is the new imbalance move or the IPM as we call it here. Please note that the Steidlmayer processes 2 and 3 are actually included as one zone here as step 2 indicates start of balance whereas step 3 of the 4 step process is actually the end of the Balance process.

So we have a move in the BankNifty which on a larger Time frame has gone from imbalance to balance and back to imbalance. The question we need to ask is whether the imbalance has ended and whether we are in a new sideways move again or not?

For purpose of simplifying things further, I have given the value areas for each of the zones based on volume profile which tells us where the market developed 70 % of the Volume.

It is interesting to see from the chart that the down move had halted at the VAL of the Move A near 10662 levels and and the recent down move ( Move C) has matched the magnitude of move A with the highest volumes being distributed again in the 10880-10930 regions, which is the same as Move A

Coming to the current price, we can see overhead resistance now near 11315 spot, above which a 300 point move can be easily taken towards 11590/ 11635.

The zone of 11590-11653 if reached is a critical level and can push price lower to 11315 again or can result in a bigger drive back to 12000 if adequate buy volumes are present. Hence this level becomes like a stop and reverse for all traders across timeframes.

If the down move has to continue the bank nifty has to spend as little time as possible above 10880-10930 zone. Even in a case where the bank Nifty does that but fails to overcome 11315 then we can safely conclude that we are in a sideways market for the duration of the week.

Watch this index. It holds the key to how the Nifty would behave next week.

Careful here !

This time the b shaped profile from yesterday worked well to the south side despite all the volatility in the BN futures in the morning.

NF stayed well below 5637 all morning.

So we have broken out of the previous range and now seem set at the top of the previous bracket between 5570 and 52XX .

There is a balanced profile at 5565 as an HVN ( not in chart) and should be an important ref level on the downside.

A rejection of this level, can act as a catalyst for a move through the previous balance and visit lower near 5350

Profile at noon.

We have seen a strong buyer off the open this morning, more as a response to the lower prices near the 5730 levels we had marked out as borderline in Monday's post.

In profile a gap is considered a splendid risk-reward opportunity as it points to the presence of a longer time frame player in the markets. Incidentally, a gap is considered as a movement away from the previous day's range ( high or lows), and not the difference in a close and open.

The open drive which was initially a gap-fill turned into a successful 80 % rule trade and current prices are up over 115 points from morning lows of 5750.

Of interest to us now, is two points :

a) staying above the 5850 level marked out in Monday's post
b) the lower end of the double inside days from last week at 5880.

I have marked the double inside days as one single profile in the above chart.

You would have noted on Friday last, the market rejecting this entire zone from 5880-5936 in the move off the morning.

The rest of the chart is annotated.

Intra day Profile

Here is the profile chart as of 1.00 pm today.

The region between 5880 and 5940 as well as the probe to 5971 marked a bracket of last week. On friday the responsive seller completely rejected this value and we saw a move lower to the balanced profile and the region of 5860 as expected.

This morning we are seeing a continuation of Friday's auction with price probing to a new level of 5801 currently.

The possible targets are the single prints from 30/ 3 or the POC from 29/ 3 near 5970 levels.

It will be important to see buyer behavior at these levels. A further down move can bring 5730 which will mark the end of the up auction and one time frame behavior seen from 5300 levels. Also I have marked a dividing line between 5855-5865 for new shorts entered today. However a push to new highs for the swing trader will begin only above the top bracket or above 5911 levels.This can take the market back up to 6031 levels and beyond.

Welcome to April

On april fool's day, we start a new series with a pressing question on whether the move seen in the last half of march would continue to 6040 or we would see a revisit to 5550/ 5650.

We are currently working a balance zone between 5835 and 5880 with an excess both sides being rejected in the past two days.

The resolution of this balance zone will set up the next high probability trades.

Clearly the month of March was different from the past five months as we witnessed a stop in the one time frame movement seen from the start of November.

The current levels which are above 5800 seem to suggest that the downmove has been nullified and we are working our way back up to 6300 levels again.For this to be possible we will have to close out April above 5800 also.

The chart illustrates the buying seen above 5550 levels and continuation above the red line in the second pane will signify more buying interest.

However if 5800 breaks then a 100 point drop to 5700 is on the cards.

On the edge of balance

Yes, that where we ended in the Nifty and the Bank Nifty today, on the edge of balance.

I'm of course referring to yesterday's post and the balance zone of the past three days. Many times a composite profile takes more than a day to resolve ( if it has to) as it has been developing over a few days.

So Buyers pushed sellers to the brink, but could not topple them over, though the OI data will show a lot of short covering, but they are still around.



The red rectangle is the break up of the profile chart of yesterday.Once price reached the top of the development, there was hesitation at the previous single prints and a bell shaped distribution started which was an indication to part book longs from lower levels on an intra basis.

In the bankNifty, there was a little enthusiasm above the 10715 level, which was the region to shut off new buying for the day.



The red rectangle is again the 3 days of this week on the left and the profile of today shows development again in the single prints.

So what is the message the market is trying to send here :

!) From the chart above, it is clear that any weakness at the open tomorrow will send the market down to the centre of the zone currently near 5478 levels.First sign of that happening will be a convincing break of 5523 tomorrow.

2) If we have to look the other side and we have a strong open, then it means a break of the three day balance which will bring 5577, 5625 and later 5677.

Here's a daily chart of the future :



5625 is the zone of previous selling as also the zone of the 200 DMA. Since the market has a lot of people who trade on parameter based indicators as opposed to market generated information, one can expect this level to be over-run and 5677 attempted.But nevertheless between 5625 and 5677 the real test on the upside for the market will happen.

The Open holds the key again for tomorrow.

Mkt is still in balance..waiting.

Before the last hour got underway, we were seriously looking at a close above value high , which would have given the buyer a small foot in the door to reverse the large downtrend we have been witness too.

The news driven last 30 minutes sell-off destroyed the balance developing in both the Nifty and the Bank Nifty in terms of market structure.

But a closer look at the weekly action so far in both indices reveals this :

Nifty :



Bank Nifty :



I last commented on the importance of balance in this post made on 26th Jan and also an earlier post

The action can be compared to a similar one between 5640 and 5840 earlier.In both cases the movement is random which can be frustrating if you are looking for a directional move in the market.

The balanced profile tells us that buyers and sellers are accepting the new price for auction and generally one can expect two way movements in the market during this period.

Also the profiler is on the watch-out for initiative activity out of the balance zone which are highly profitable trade set-ups.

To close, here is the updated Order Flow from the morning :

Nifty :



Reliance :



SBI :

Disbelief

The story of the day today was high volatility and complete dis-belief.

The sell from the open at 5760 was looking like 5550 very early in the morning when it turned and moved away from the morning lows to 5780 and then 5810 and before you could react you had 5855 printed.

What followed was even more intriguing as the market failed to hold 5814 yet again and toppled this time for good to reach the Other objective near 5630. It didn't-missed by 7 points again.

As Girish said, the car on the cliff was pulled and pushed over by even more momentum. The sellers are sadistic Pi**.

Luckily for us and for our guests in the trading room, we had orderflow indicators designed to catch all the volatility of the markets.

4 signals today :

1) short at the open with an OrderFlow red.
2) Buy at 5725 when it changed color to blue.
3) reversal at 5735 which was actually a whipsaw for a 12 point loss.
4) short at 5735 again till 5670 was printed much later in the day.

Have a look :



The total gains in OF were 260 Nifty points in the 2 big trades of the day.

In the Bank Nifty there were 3 profitable trades today :

1) short at the open with an OrderFlow red.
2) Buy at 10700 when it changed color to blue.
3) short at 10900 again till 10420 was printed much later in the day.





The total gains in OF were 680 BankNifty points in the 2 big trades of the day.

Looking into next week, the markets will continue to be volatile, but with such good indicators for direction one need not worry.

Bring it On !

Balance

I got inspired by Girish's "Car near a cliff" analogy and decided to post a few charts to explain the concept better.

Have a look :



This is the activity chart of the Nifty future this week illustrated through the use of market profile.

And the Bank Nifty future :



Random movements of the markets and the volatile nature is best shown on these 2 charts.

Now take a look at these two :

Nifty Future :




Bank Nifty Future :



The 2 charts above are a consolidated profile of the past 4 days of action.

It shows clearly what the market is trying to do here.

The Nifty future clearly shows a balanced profile developing over a 4 day period with a point of control around 5810.

You last heard about a balanced profile and the impact it has on a market in this post
here

You last heard about the importance of the 5810 level in this post here

There is a directional move ready to unfold.

Use 5810-20 to manage the risk.

One more directional move ahead

We had a dull day in the markets today in terms of movement, but rather an eventful one in the trading room where we caught up on the importance of balanced profiles.

It's the dull boring days in the market, which make a profiler sit up and take and even more closer look at the market action, because the market is always sending a message when it is open !

So I chuckled to myself again this afternoon when the lacklustre moves of the market were attributed to the holidays amongst other things. It was in the same Holiday period,6 sessions back, that the market had put in over 220 points straight.

If you had caught my last post made on the 23rd of Dec posted here, then you would have caught a bulk of the action as the post clearly had said, " there is a clear accumulation of volume at 6000 levels which would give rise to the possibility of a directional move coming from these levels".

Let's have a look at some charts to test the theory further.

We follow price profile charts and are always looking for profile shapes which look like a bell kept sideways. These are what we call bell shaped profiles.



The green rectangles in the chart are all examples of balanced profiles.The POC is generally at the centre of such profiles and gives excellent directional moves from there.

All important levels are marked in the chart and one should use the levels to get in or out of positions.

Let's look at the Bank Nifty :




Again the green rectangles give you the balance of the market.

The Balanced profile always indicate that the market has reached an agreement between buyers and sellers and the market is priced currently at fair value.

The market may choose to remain in balance for periods ranging from a few hours to a couple of sessions, But the break away from the zone is the one you can trust and take a call.

Now before you ask me after looking at my title " which way?", let me honestly tell you that I do not know.There can be a move to 6255 or 6120 immediately from here, but again a 50 % possibility in terms of direction.

The balanced profile tells me that the market is balanced without a bias,hence you have to be balanced without a bias

Always follow the message of the market.