When the market closes, there is never a guarantee of whether it will open higher or lower the next session. If we knew that, trading would be a whole lot easier. But there is something I look for on a constant basis that I have found helps me tremendously. It is to see how the stock closes on the day.
To me, if I am looking for a bullish or bearish directional trade, this is vitally important. For example, if a stock is looking like it wants to move higher, I like to enter the bullish trade closer to the end of the session if the stock looks like it will close toward the high of the day. Naturally, I want the stock to close in positive territory as well, like the example below.
Many times, you will see the stock continue to move higher, particularly if it is breaking resistance or triggering a bullish reversal. For a bearish potential trade, look for a bearish close with the stock closing near the low and down on the session. I consider entering a bearish trade toward the close of the session like the example below.
Many times, the stock will continue to move lower, especially if support has been broken or that bearish close has triggered a bearish reversal.
Whether a stock closes bullish or bearish, there is no guarantee it will continue in that fashion the next session. Market risk can move stocks too. But being patient and waiting to enter a position when there are more odds on your side can improve your results.
Senior Options Instructor
Market Taker Mentoring, Inc.