Yeah I remember those days on the DT threads, I was one of them. Look for the guys scalping a few pips for income, those gap opens were/are an important signal. EG. You’d never buy a gap open but the entry was the opening gap close as that’s often when the stock goes for a run. That shake to trap the folks who gapped it up in the first place was the entry signal where many a stock went for a run.
The gaps down are a good question and there are many theories on that. My opinion is that 80% of gaps down are on bad news after a strong spike where news was expected but didn’t meet markets expectations. They are much harder to close as the stock generally re-rates itself back to a relevant MC. I find that in many cases, a strong gap down will often present an opportunity for a quick flip but they don’t bounce enough to close the gap. But importantly, after that flip, stay away as the trend will be down as the stock is punished.
In summary, exuberance can easily be rebalance (gap up) but disappointment or failure to meet the market ( gap down) is a far harder ship to turn. IMO.
Cheers
NEU Price at posting:
$16.57 Sentiment: None Disclosure: Not Held
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