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GAPS
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DEFINITION
Gap UP ………….High t < Low t+1
OR
Gap DOWN…..…Low t > High t+1
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GAPS
•COMMON GAPS
•BREAKAWAY GAPS
•RUNAWAY GAPS
•EXHAUSTION GAPS
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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
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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
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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
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RUNAWAY GAPS
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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
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EHHAUSTION GAP
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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
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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
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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
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DOUBLE TOPS
THE FAILURE RATE OF A DOUBLE TOP IS 65%, BUT WAITING FOR ACONFIRMATION CUTS IT TO JUST 17%
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CONFIRMATION POINT
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DOUBLE BOTOMS
IN A DOUBLE BOTTOM , BOTTOMS CLOSE TOGETHER PERFORMBETTER
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BROADENING FORMATIONS
A PARTIAL DECLINE FROM A BROADENING TOP SIGNALS A UPWARDBREAKOUT 86% OF THE TIME
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SYMMETRICAL TRIANGLES
PULLBACKS FROM SYMMETRICAL TRIANGLES ARE MORE LIKELYTO OCCUR AFTER A HIGH-VOLUME BREAKOUT
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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
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HEAD & SHOULDERS
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