Here's a small update to a chart I had posted at the end of last month.
In that post titled institutional activity we had noted the imbalance from 5650 levels with a view that it was ending at 5900 and a balance would begin.
That post is here- https://www.vtrender.com/content/institutional-activity
Here's an updated view of that same chart :
The profile after several days is looking like a completed bell with a small pocket needing attention.
This pocket would be the market's main focus and we have already had two distributions in this zone on the past two days. This morning also the market is working this zone out.
Markets move always from a state of imbalance to a state of balance. The balance is now appearing in the charts and when done this balance will give way to a 200 point move from this zone currently.
It's still not complete though and one gets a feel that the market may stay here for the next two weeks as well.
Crude Oil was in a state of balance from 20/ 11 with a lower range at 4800 approx.
On thursday last it broke through and trended down in a 120 point move.
Thereafter it auctioned in the lower region of a previous HVN from 8th November profile ( purple line).
The setup today is interesting as a break of this new found value can force a move to retest old business at 4800 levels.
What helps this belief is that value of 6th dec did not migrate lower that day, so the new shorts do not have much conviction and can be forced to cover.
The trade setup would be a long above 4720 for 4740 and then a move above 4744- 53 region towards the volume zone of 4797.
We will see how this plays out.
Last week was a very interesting week in the markets and if you are a student of Market profile, the charts showed all the different auctions working through the course of the week.
Some of the moves were event driven, but charts do not lie and at the end of the day a look inside would show clearly greed and fear working at it's optimum and the market's move towards efficiency.
Here's the chart, annotated and hopefully self explanatory.
Monday and Tuesday were normal distributions and I have clubbed the profile with the one from Friday to show up as one large 3 day balance with a defined value area in green.
On Wednesday we had a move above this value area and the upper edge of this distribution resulting in the market building value higher. But what was different for us in this auction was that the move was gain balanced or a normal Gaussian curve as can be seen from the 5/12/12 chart. As mentioned in the chart, it was a balance with no tails meaning that the market was not in a state of imbalance and this balance would not hold.
That move from balance ( to get the imbalance) happened in the next session and it caught the market players by surprise as it was a rejection of the previous day's move. The single prints right through the Centre of the two distributions testify that the rejection was very strong. Over the next few hours the market went on to build value lower in a b shaped profile after rejecting the value areas of the past 5 days.
However this auction was terminated the same day as the market put in another move higher in what was a typical Neutral extreme day in the Nifty and the Bank nifty .On to Friday and knowing the market finished neutral extreme the non- continuation above Thursdays' highs did not make a case for new longs to be added and the market again drifted .
Against this background we approach the coming week knowing well that the market is refusing to auction again in the 5920- 5890 NF range . The region between 5915- 5925 is Friday lows and the edge of the 2 distributions seen in the chart on the left and would be an important factor for upward bias to continue in the markets.A failure here will make the market go test the lower end of the 3 day balance from 30/11.
On the other hand the single prints from Thursday morning and the lack of follow through on a neutral extreme show that the seller is active at the higher end.
That also along with the fact that there is a balance region from Wednesday 5/12.
What may be a possible scenario holding 5915 NF would be that the market may drift slightly upwards increasing the upper balance boundaries as it travels higher.
If on the other hand we see a another profile with a strong tail like the one from early Wednesday then the market will have to visit lower before it gets to higher levels.
The last 2 sessions in the Nifty and the BankNifty saw FII's make purchases of 2650 CR in the cash segment and 3700 CR in the Index futures.
Do you want to know where this buying happened?
Have a look at this chart :
In market profile the most common way to look for longer time frame activity is to check for single prints.
Single prints are areas of institutional activity where we see a quick rejection in the form of a strong movement away in a short period of time.
Refer to the glossary here- https://www.vtrender.com/content/single-prints
In the chart above we see more evidence of this institutional activity in the highlighted green boxes.
When you see that one should not take a bias against these players and it pays to be on their side always.
Coming back to the market today, at some point of time we need to see this imbalance ending and a distribution happen.
Remember the market flow is from imbalance to balance and back to imbalance.
Here are two volume profile charts of the Nifty and the BankNifty futures showing the distribution of volumes over prices through the November series with 1 day left for expiry.
Last month most of the rollovers took place in a narrow range between 5728 and 5756, so it was expected that this series may have some volatility.
In fact the profile picture above shows the market's liking to 2 distinct zones , one at 5740 and the other at 5640.These can be seen from the black graph across the chart.
The shape is that of a DD with the Nifty resting at the upper volume level of 5740 currently. The extent of the move in the past session and the fact that we hit the volume pocket shows that we may not move much ahead above this point for expiry.
The series volume weighted average is at 5680 and price staying above this will definitely give a positive bias to the next series.
As we know from market profile, buyers are in control above VWAP. Also value high at 5730 near the POC will give a positive spin to the index above this value line for december.
Unlike the Nifty chart above which is a DD for the series the BankNifty profile looks more balances with a single distribution centering at 11512 in the futures.
The value area developing is almost the same as the OCT value area indicating acceptance of these prices after the big move from 10000 from 2 series earlier.
The 11500 zone will continue to be a pivot around where the next large moves in the bankNifty should emanate from,
11500 is also the series vwap and gives the bias to the buyers again for the banknifty.
Developing value high is again places near 11700 like the October series and will be an important level for further upsides in the bankNifty.
The Prime levels are updated in a sheet periodically by us .
You can also access it through the today page and the link is open to all.
The prime levels are made on the last big auction in the markets and is independent of clock time as measured in hours, minutes or days.
We believe in auction theory that the markets move in the way they want based on buy-sell pressures and is independent of time. It's for this reason we refuse to calibrate the market in minutes or hours.
Coming to the subject of the post, the most important number in the prime levels sheet is PP0 which is the number to get the bias of the market. The market has tilted to the buy side when it moves above pp0 and to the sell side when it moves below.
The levels PR1 and PS1 represent extremes of the current swing and a market which moves beyond these points is known to have changes the swing and is likely to move to PR2 and even PR3 or PS2 or PS3 as the case may be.
As an example today's PR1 in NF is 5642 which the market has to take out to reverse the previous swing down.
Similarly the BNF took out PR1 at 11434 yesterday and promptly moved to PR2 11521 today and may even get to PR3 at 11608 or closer.
These are not absolute numbers but important supporting tools to get the bias of the market right.