ok folks...where is the bottom ?, page-23

santos charts trading gaps.swing trades just chat
Funny just reading up on trading Gaps ...


The chinese call leaving the Gaps
Hiding the Talons

Have you ever noticed a stock or an index, which seemed to be moving
effortlessly in its desired direction, suddenly stop dead in its tracks? Have you
ever noticed how this often happens nowhere near a major moving average or
trend line? Do you sometimes find yourself watching a trade reverse in your face
and not have an explanation as to why this happens?
More often than not, the answer can be found by identifying areas of gaps on
weekly, daily and intraday charts. In order to determine all potential areas of
support and resistance when you are evaluating a trade (we all have our targets
and stops in mind before we enter the trade, right? Right?) you must always
consider gap areas.


Hmm thats what I thought ,had the wrong idea and expected them all to retrace..
Not so....
trade the gap
An opening gap in the direction of the intended trade is a sign of strength (or
weakness for shorts). Therefore, when market conditions are favorable and the
gap isn't too large, you should trade the open.
Obviously, "favorable conditions" and "too large" can be somewhat arbitrary. In
general, favorable conditions means that the overall market and sectors are in
gear. This means they are trending strongly, or if they are not trending, are
showing some signs of a major reversal.
"Too large" can be gauged in terms of the volatility of the stock and the pattern
(setup) being traded. A two-point gap may be too large for a stock that barely
moves two points in a week. On the other hand, a two-point gap for a volatile
stock, say one that trades 5-10 points in a day, isn't as significant. As far as
pattern, if the gap is near a technical level, then the trade should be ignored. For
instance, suppose you are looking to enter on a pullback. If the stock gaps all the
way to the area of where the pullback began, then you have missed the move
from the pullback to the old highs. Often, in this pattern, this is all you get.*

The Second Entry Option
Depending on the market conditions (especially in choppy markets), you might
want to let a stock trade for 5-15 minutes to see if the stock comes in. Then you
can place your order above the gap/intraday high for a "second entry." This helps
to avoid potential bad trades, as gaps can often be the high or near high for the
day. The trade-off, of course, is the opportunity cost of missing a good trade if the
stock gaps and never looks back.
Fade 'em
Often, especially after a strong trend, markets will gap to their final high. As
mentioned above, this occurs as the Johnny-come-lately's dog pile onto a
market. This is known as an exhaustion gap . For the
nimble daytrader, this may present an opportunity to fade (go against) the
market, using a tight stop (usually right above the gap).

if market conditions are not favorable and/or the
stock gap is too large, then the trade should be ignored. As mentioned above,
"Too large" can be gauged in terms of the stock's normal volatility and in terms of
pattern.