The key to understanding why prices sometimes continue to rally after a gap-up(like yesterday in bank nifty) and other times reverse lies in the psychology of the market participants, especially the traders' emotions like FEAR and GREED.
Market Movement is Driven by People’s Decisions:
Price movements are not purely technical or indicators. They're driven by traders' decisions, which in turn are influenced by their emotions, beliefs, and expectations about the market.
Understanding when traders are FEARFUL or GREEDY can sometime help predict market direction.
Let’s break this down using the example of Bank Nifty on 24th March:
1. The Scenario in Bank Nifty (24th March):
Big Resistance at Swing High: On the daily time frame chart of Bank Nifty, there was significant resistance at a swing high level, which many traders believed would lead to a reversal. Because of this, many short positions were created around that level, with traders placing stop-loss orders(buy orders) above that resistance.
2. Gap Up Above Resistance: On the 24th of March, Bank Nifty opened with a gap-up much above this resistance level. The gap-up triggered the stop-loss orders (buy orders) of the traders who had short positions, causing them to buy the bank nifty to close out their losing positions.

3. The Psychology Behind the Move:
FEAR in Short Sellers: When the market opened above their stop-loss levels, short sellers realised they were facing significant losses.
This fear made them panic, and they rushed to cover their positions by buying Bank Nifty. This panic buying is what initiated the rally.
GREED from Breakout Traders: As the price continued to rise, traders who were waiting for a breakout above resistance saw this as an opportunity to enter the market.
Their greed motivated them to buy aggressively, pushing the prices even higher, thus continuing the rally.
4. FEAR and GREED in Action:
FEAR: The fear of taking a bigger loss prompted short sellers to cover their positions, which created buying pressure.
GREED: Breakout traders, who had been waiting for the price to break the resistance, jumped in to capitalise on the move, further fuelling the rally.

After 6 consecutive bullish days in Nifty, we saw a bearish day yesterday (March 25th) at a swing high resistance level on the daily chart.
However, when we look at the 5-minute timeframe, it becomes clear that what initially seemed like a breakout was actually a fake breakout.
Here's a breakdown of how to identify and trade in such a fake breakout scenario:
1) Initial Breakout Candle:
The price breaks above the swing high resistance, triggering a breakout. Many breakout traders likely enter long positions, hoping for a continued rally.
These traders typically set their stop-loss orders(sell orders) just below the breakout candle.
2) Bounce from Breakout Line:
After the initial breakout, the price pulls back to the breakout line (the level where the breakout happened). Buyers defend their positions here, as they don't want their stop-losses to get hit.
This leads to a brief bounce back upwards.

Statistically, In intraday, market tends to stay sideways about 70% of the time, while it trends only about 30% of the time.
One way to predict trending days in advance is by analysing the opening range of the day, which refers to the first one hour of trading (also known as the initial balance).

If the market remains within a narrow range during the first hour, as seen in yesterday's (26th March) Bank Nifty chart, it suggests that there is potential for a breakout after this range is broken.
This breakout, depending on which side the range is breached, can often lead to a trending move.

This concept based on a price action theory known as "contraction leads to expansion," where periods of consolidation or a tight range are often followed by significant price movements once the range is broken.