How to READ/INTERPRETE/TRADE Levels of Pre-open vs. D-Vol ?

There may be divergent views generated by these 2 different levels.  

D-Vol theory is based on Close, which is last close and levels are derived based on daily volatility prevailed on that last day as published by NSE.

Pre-Open levels are based on Pre-Open of the Day, available at 9.08 am on trading terminal, worked as per minimum volatility conditions. Pre-open levels may be extended either side by difference of last two levels, with SL of previous level crossed.

There can be different scenarios which may be noticed among levels and we need to tackle these levels with latest available figure, which is pre-open.

A.      Where pre-open and Close are in nearby areas: In such cases, normally, it is found that support is found near Downside trigger point in case market is positive as per EOD Report. If market is in downtrend as per EOD, the resistance is seen near upside trigger points, as per either theory. If such level is crossed, one-side movement on triggered side may be seen. SL may be kept at one level below, which is crossed – on either side.

B.      If pre-open is Gap-Up Open or Gap-Down Open: Gap-Up Open is when market Open is above previous day’s HIGH (not Close) and Gap-Down Open is when Open is below previous day’s Low and not Close. It is also likely that pre-open in such cases may be Open above/below upside/downside trigger as per D-Vol.

In such cases, two scenarios are possible. One is forging ahead with ongoing trend as per EOD levels and market surges ahead to achieve upside levels if EOD trend is bullish and vice versa. In such case, market takes support just above the “Downside trigger” level and moves upside.

Another scenario is reverse. It may face Resistance at First level as per pre-open levels and market starts correcting till Upside trigger as per D-Vol theory. If market is in Uptrend as per EOD, it would take support near Upside trigger and market may bounce back. It is also likely that it may attain 2/3 downside levels as per pre-open, till Upside trigger is touched, or all downside levels as per pre-open are achieved. Trend turns bearish only after breaching downside trigger level as per D-Vol theory.   

C.      If pre-open is not gap-up or gap-down, but either “Above Upside Trigger” level as per D-Vol or “Below Downside Trigger” level. In such case, one has to watch for the follow-up action on same day and trade cautiously in direction of trend, as per levels. In case of bullish EOD report, SL may be “Downside Trigger” as per D-Vol and vice versa.