Many people ask me how to determine whether to go long or short at critical levels. The key is to observe how the price approaches these levels. The same resistance or support level can send completely different market signals depending on the approach.

First, let's talk about the quick breakout type. The price suddenly surges toward a resistance level, but once it breaks in, it loses momentum and is eventually pushed back. This is a typical false breakout. Aggressive buyers in the market get slapped, and the bears have already been lurking. At this point, what you need to do is simple—short at the resistance level or go long at the support level in the opposite direction. Failed breakouts often lead to the most fierce market reversals.

Next, consider the slow grinding type. The price approaches a level steadily and gradually, even if the other side keeps selling, the price continues to grind upward steadily, gradually absorbing the selling pressure. What does this indicate? It shows that the bulls are well-prepared and willing to keep accumulating at this price. In this situation, it’s better to go long on a breakout of the resistance level or short at the support level. Slow approach usually signifies that the trend has already been established.

Remember this point, and you’ll be able to anticipate reversals in each wave of the market in advance.