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.