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Old 05-07-2007, 10:59 PM
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Re: Intrinsic Reasons for Support and Resistance changing roles

Once a area of resistance is taken out, the shorts who sold are in pain. As prices come back to their entry point they will most likely cover to limit their losses. Also, the shorts who planned to sell at resistance but did not are no longer thinking of shorting. Instead, they are likely to switch from a short to long mindset. This throws in another group of buy orders at that price level. Combine that with traders who love to buy pullbacks and you have buy orders from different traders across the board. This will cause resistance to become support.

Once you got the late shorts covering at a loss and momentum traders joining in, price is going to rally until the late comers appear. My 2cents

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