Abet Chichi2

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Chi2 TA Education So called "Filling the Gap" is a "Retest".

QUESTION People always talk about gaps being filled or that they usually fill. My question is why do they fill, what has happened to the price that must cause the gap to be filled. TIA

ANSWER So called "Filling the Gap" a "Retest" discussion.

(way at the end of this, i added Gap Analysis and Gap Strategies from Stockcharts.com chart school incase some may want to skip my reply and go straight to Chart School answers)

that is it is a retest of a breakout
in its case, a retest of a Gap breakout.

Lets look at where a few Retests occur...

prices tend to "retest" on "break outs". (not always, but sometimes)

Retest therefore sometimes occur
(these are a few examples)

there is some type of stock pattern
such as a triangle, or a head and shoulders pattern.

the stock's price will continue its break out for awhile then lose power/momentum and come back to see if this was really meant to be. traders will tend to move the price back to toward but not always to the point of the breakout. That is, we have a retest of the breakout.

Now lets address a GAP.

the stock price could be going Up or Dn. Then it jumps in price leaving a hole if we were to think of Stock Price as a Continuum.
Continuum meaning it goes on and on forever even though we know the markets close and open.

Many of the important Gaps that people tend to play are Opening Gaps. Where there is a difference between the Opening Price and the Closing Price but an amount the investors would consider significant.

to make my wording easier, i will assume the Opening Price is 15 and the Closing Price was 14, so we have a significant jump in price. The stock moves up until something turns it down. If this is within a reasonable amount of time, it could then be thought be "retesting".

Just like if it had run up from a break out of a Stock Pattern or over a trend line, then we would say it was retesting the trendline or name the stock pattern.

When it is retesting the Gap, people tend to say it is a tempting to Fill the Gap.

Now what does that mean, ie when is a Gap Filled?

The answer is similar of any other form of Retesting.
The retest is complete when it quits retesting and turns back the other way again. or it breaks back below the breakout point.

A Gap can be said to be "Filled". Even if only reaches the nearest Lip. Or it goes part way across the Gap. Or it reaches the opposite Lip.

Be aware, being filled is another way of saying this form of Retest, is completed. Example: The Gap retest maybe completed when the Near Lip is touched. A person could then say, the Gap Filled. But be aware, just like any retest, that person may be wrong and more gap is filled in the next move.

GAPS AND GAP ANALYSIS
Common Gaps
Breakaway Gaps
Runaway Gaps
Exhaustion Gaps
Conclusion

http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:gaps_and_gap_analysi

GAP TRADING STRATEGIES
What is a Gap?
Why Use Trading Rules?
The Gap Trading Strategies
Full Gaps
Full Gap Up: Long
Full Gap Up: Short
Full Gap Down: Long
Full Gap Down: Short
Partial Gaps
Partial Gap Up: Long
Partial Gap Up: Short
Partial Gap Down: Long
Partial Gap Down: Short
End-of-day Gap Trading
What is the Modified Trading Method?
Modified Trading Method: Long
Modified Trading Method: Short
Where do I find gapping stocks?
How successful is this?

http://stockcharts.com/school/doku.php?id=chart_school:trading_strategies:gap_trading_strategies