gaps. definition gap up ………….high t < low t+1 or gap down…..…low t > high t+1

GAPS

DEFINITION

Gap UP ………….High t < Low t+1

OR

Gap DOWN…..…Low t > High t+1

GAPS

•COMMON GAPS

•BREAKAWAY GAPS

•RUNAWAY GAPS

•EXHAUSTION GAPS

COMMON GAPS

•OCCURS WHEN MARKET IS IN A TRADING RANGE

•RARELY SIGNIFIES ANY MAJOR CHANGE IN THE MKT.

•PRODUCT OF A SURPRISE

•GETS GENERALLY FILLED

BREAKAWAY GAPS

•USUALY OCCURS AFTER A CONSOLIDATION PHASE

•GAP WILL ACT AS SUPPORT AND RESISTANCE ONCE THE MARKET MOVES AWAY FROM IT

•WILL FUEL EVEN MORE AS TRADERS COVER THEIR SHORT/LONG POSITIONS

•IDEAL TO PLACE STOP OREDRS

RUNAWAY GAPS

•TRADERS WANT TO JUMP ONBOARD AND RIDE THE TREND

•VERY LITTLE OR NO PULLBACK TO ENTER THE TREND

•SEVERAL GAPS OCCUR

•PRICES ARE PUSHED UP/DOWN BY SHORT COVERERS

RUNAWAY GAPS

EXHAUSTION GAPS

•REPRESENTS END OF A STRONG TREND

•HIGH VOLUME + LARGE DIFERENCE BETWEEN PREVIOUS CLOSE AND CURRENT DAY'S OPEN

•HIGH VOLATILITY

•CLOSES LOWER THAN OPENING PRICE

EHHAUSTION GAP

TRADING THE GAP

RUNAWAY GAP

IF THERE IS A GAP UP AND THE CLOSE IS HIGHER THAN THE OPEN AND IS IN THE TOP HALF OF THE PRICE ENTER A LONG POSITION

IF THERE IS A GAP DOWN AND THE CLOSE IS LOWER THAN THE OPEN AND IS IN THE BOTTOM HALF OF THE PRICE ENTER A SHORT POSITION

EXHAUTION GAPS

MARKS THE END OF A TREND AND PROVIDES OPPORTUNITIES TO TRADE AGAINST THE TREND

SELL THE UPGAPS AT THE OPEN

BUY THE DOWNGAPS AT THE OPEN

EXIT ON THE CLOSE

USE A 5-POINT STOP LOSS

TRADES GAP OPEN CLOSE PROFITDIRECTION LOSS

1 UP 1440 1435 52 DOWN 1420,5 1428,7 8,23 UP 1447,8 144,5 3,34 UP 1464 1480,4 -55 UP 1485,5 1480,8 4,76 UP 1496,5 1466,88 29,627 DOWN 1451 1409,5 -58 UP 1473 1475 -59 UP 1477 1478 -5

10 DOWN 1464 1469,5 5,511 DOWN 1461,5 1472,5 1112 UP 1477,5 1457 20,513 UP 1466,5 1411,8 54,714 UP 1425,5 1409,8 15,715 UP 1442 1446,2 -516 UP 1375 1385 -517 UP 1399 1410,7 -518 DOWN 1364,5 1383,4 18,819 UP 1409,5 1459 -5

TOTAL POINTS = 137,02

DOUBLE TOPS

THE FAILURE RATE OF A DOUBLE TOP IS 65%, BUT WAITING FOR ACONFIRMATION CUTS IT TO JUST 17%

CONFIRMATION POINT

DOUBLE BOTOMS

IN A DOUBLE BOTTOM , BOTTOMS CLOSE TOGETHER PERFORMBETTER

BROADENING FORMATIONS

A PARTIAL DECLINE FROM A BROADENING TOP SIGNALS A UPWARDBREAKOUT 86% OF THE TIME

SYMMETRICAL TRIANGLES

PULLBACKS FROM SYMMETRICAL TRIANGLES ARE MORE LIKELYTO OCCUR AFTER A HIGH-VOLUME BREAKOUT

TRIPLE BOTTOMS

THE THIRD DOWN OF A TRIPLE BOTTOM PREDICTS PERFORMANCE.

WHEN THE 3RD LOW IS BELOW THE ABOVE BOTTOMIT IS MORE LIKELY TO OUTPERFORM

HEAD & SHOULDERS