We had a fast paced roller coaster today.
Buyers and sellers vied for control at different points in the day and we had the market profile daily extremes of range hit on both sides today. ( well almost off by 7 points on either side in the Nifty and off by 14 points in the bank nifty).
As I was commenting to my subscribers a while earlier in the daily update, it is an extremely rare occurrence.
The day also gives us a grim reminder that profits on existing profitable positions need to be booked, before the market makes a mockery of the paper profit !
Around such days when the price is moving in such a wide range it is important to look at volumes and understand where the control was established and at what points the battle was won by buyers or sellers.
Let’s have a look at the volume profile heat map chart of today. This chart was posted on our other site www.vtrender-2.com yesterday, but this one is updated with today’s closing price.
This is a Point and figure ( P & F ) chart overlaid with volume profile.
The colorful profiles need to be read in the colors of the rainbow ( VIBGYOR ) with violet, indigo, blue denoting areas of low volume and Orange, Red for areas of high volume.
The profile on the extreme right is that of a 30 day period and the one towards the left of it captures the entire down move from 6210 to 5700 in a 7 day period.
The other two smaller profiles are the vol profiles of yesterday and today.
So though we had a similar kind of rise from 5720-5730 regions yesterday and today, there are more volumes at 5735 ( orange bars) in today’s profile. Hence the move of today stuck.
The 7 day chart shows a large volume build-up at 5814, which is the biggest for the entire fall from 6210 zone.This does indicate that there may have been short covering around this level today.Going further, price needs to stay above this level ( +/- 15 ) for the up move to sustain.
The 30 day profile having the largest volume in the same zone, emphasizes the importance of this level.
Looking at upside possibilities, we do have a low volume region between today’s high at 5885, the node at 5935 and the 6020 region. Low volume zones cannot be trusted and we will either have a quick move through this zone or a labored one.The last one was a quick one between the mentioned levels and the move was done within an hour !
Trade cautiously !