BANKNIFTY Set up & Trade Plan for Week Starting 25jun

BNF: Last week ,  Played out all 3 scenarios that we laid out, a test near 26150, consolidation and 26300 levels and a upward test for 26800 levels.

BNF continues to trade within the trading range formed on the 1st week of June. Testing the 78.2 % retracement, from there an upward push up to 27000, 27350 zones is a possibility. On the downside 26480-580 will support immediate support and a move below will be a good zone to test for a downward push

Now we could play out the below  scenarios  for next week

I.Continue upwards to test 27000, 27350 zones or higher, but given OI accumulation at 27000 I will be cautious for this scenario.

II.Move below 26750 and test the zones of 26580-480.

III.A break below 26350 to try and test 26150 and lower levels. Again at this point a break of 26100 looks difficult this week based on month end OI

Perspective on Support Resistances & Context of The trend.

Below is one of the trades that I recently posted and how it worked post the trade idea was created. The post is not to talk about the profit of the trade etc. but what are some learnings and observations from the trade set up and such patterns keep occurring and can be used for future trade set ups as well.

First the trade Summary:

Posted on 20JUN: #USOIL #CL_F consolidating in a range. likely to take off if 66 is taken out for a quick test of 68.5-69 range (Price then 65.47)

Result: Price on 23 Jun : 69 USD

So how was the trade idea generated in the first place: we had series of lows on lower volumes and any sustained follow ups, while a big resistance zone laid ahead at 66 levels where we had a series of tops. So what that meant was while the buyers were not active the sellers didn’t find any follow up trades. What could this mean be that there were no new sellers emerging at the lower levels. Hence a contrarian buy idea if the level was crossed as that would mean sellers would have to force close the trade and could lead to short covering.

USOIL time for take off by PowerTrades on TradingView.com

How did the trade span out?

• .We did move to cross 66, failed to sustain and fell back to test the lows.
• Trend lows again gets respected.  And here is the catch here, just a trade based on support and resistance could had meant a trader would have reversed the trade there, while what was at best needed is to close the trade and look for a follow up on either direction, this comes from the context of the trend and that markets have failed to fine new sellers at lower levels.
• Keep looking for an active trade on test of 66 and above or an aggressive set up could mean even a quick reentry once low was respected.
• 66 again gets tested and this time on June-22 the lows fail to get below 66. So what was a resistance previously has now become a support, that’s a key observation to take home. – This is another opportunity for an aggressive trader to potentially take a low risk add up positions. And once there is no push below 66. boom it takes off.
• Where does it pause. exactly at a low volume node, which again coincides with previous swing highs. hence that level acts as a double confirmation.

So, many lessons and pointer in a single trade journey. As a trader this is the observation and process to take home irrespective of the time period we trade. . S/R alone can lead to lot of whipsaws on false highs or lows. Trading on the alone could have led to 2 false trades in the above trade journey.

Trying to understand the context of market can do, in conjunction with support resistances is a powerful tool