[Soultrader]

The previous session's high and low act as a short term resistance and support pivot. If price opens in the previous days range, we have a market in balance. Understand human psyschology. Those who missed shorting yesterdays high are in regret and they will likely short if prices do come to those levels. Those who missed buying the yesterdays low will also step in to buy if prices do reach those levels. Thus we have support and resistance.

If price opens outside of the previous days range, we have a market imbalance. Once price breaks out of the previous days range, stops are usually placed above the highs and below the lows fueling momentum. This will usually carry price further as new market participants will join the action.

Floor traders prefer to be on the short side. Why? Money is made faster during a panic than a uptrend.

Here is a quick note: Trade from the long side when price is above the previous days high and trade from the short side when price is below the previous days low.

Also look for price acceptance vs rejection at these new levels. If prices pop out of the previous days high just to be rejected and pushed back into the range, it is usually a good sign to short.