lowtrade

[lowtrade]

Humm our friend asked me to Google gaps. And finally found some research proving 90% of common gaps fill. Before I would post that's my rule, due to experience. But it could be more or less?

Someone studied 24 years of Dow Jones data and found;
http://bioequity.org/2013/11/13/statistics-do-stock-price-gaps-always-get-filled/

Conclusion:

So what’s that mean: when a stock price gap is observed, by a chance of 91.4% it will get filled in the future. In layman’s word, 9 in 10 gaps get filled; not always, but pretty close.

And Nasdaq

Nasdaq-100 stocks, high volatility by nature, have wider distribution than DJI stocks. A few stocks in the index are not old enough to have many gaps. Nonetheless, about 92.2% gaps get filled.

Also I define a gap as the difference between the previous days closing price and the next days opening price. While most financial sites use the term daily price range, my experience uses open close. I don't include candle tails, only real bodies and Candle Stick Charting website agrees.


http://www.candlecharts.com/candlestick-charting-glossary.html
gapping plays: There are two kinds of gapping plays: 1. High-price gapping play—After a sharp advance, the market consolidates via a series of small real bodies near the recent highs. If prices gap above this consolidation area, it becomes a high-price gapping play. 2. Low-price gapping play. After a sharp price decline, the market consolidates via a series of small real bodies near the recent lows. If prices gap under this con­solidation, it is a sell signal in candlestick trading.