We had a balanced profile in the markets yesterday as market participants waited on the RBI to announce it's monetary policy.
As traders we do not place a lot of importance to news flow or the type of news but are very interested in the end product which triggers a rebalancing of inventory.
In short we watch not the news, but the market's reaction to the news which brings out changes in established buyer- seller behavior.
Today's auction continued from yesterday and we had a 2 day DD in the markets.
The definition of a DD is here – http://vtrender.com/content/double-distribution-dd-0
The day type fitted the definition well as the market found value around 5790- 5735 in the lower half.
The second bell shaped curve lower down does not look complete yet and the market may spend some more time in the lower part to complete the distribution.
A DD once complete can do one of 2 things-
a) Move to the centre of the DD in the area of poor distribution or minus development region as profilers like to call it and complete a larger distribution curve there .
b) Move below the Lower distribution and auction downwards.
Here's a profile chart from early this month.
The chart above is from the first week and shows the profile from the 1st, 4th, 5th and 6th of March.
The 1st, 4th and the 6th were all balanced profiles with the move on the 5th trending higher from the POC of the 1st.
Today's sell off began as the profile from the 6th of March got compromised and proceeded to make it's lows at the bottom of the single prints of the 5th of March.
Hence an auction staying below 5730 tomorrow is likely to bring 5682 Mar again.