Let me explain what I've learnt from age 16 from one of the best 40+ year experienced Technical Analyst, a family friend, father figure of sorts and also many others over the years of paid Technical Analysis trainings. Those days there were no computers plotting charts. I used to help my 'Guru' plot daily OHLC price movements from a daily finance newspaper onto a specially printed large A3 sized graph chart paper. We used to also make Weekly and Monthly charts similarly from the daily chart data. The Gap theory it is something known to most technical analysts, its in many Books published thereafter and also a part of a training curriculum. Certainly used by traders globally.
Whenever a Gap is created after the price jumps without tracing into the previous days trading range, its viewed as a vulnerability in the chart.
Technical Analysts, have over decades of observations and analysis of such occurances have seen in most cases, the price tends to retrace back to the Gap levels and filling the Gap, an old Void before bouncing back. Can happen after decades. magically the reversal happens at the Gap closing price. As if human traders are looking out for it.
So, there isn't any set rule for why it happens. There is no Jinx or Black Magic here. Just like how MSB's mesenchymal cells work wonders for cure, survival, pain relief etc. the mechanism is not fully known. it just works...
There is no potency essay for this theory. It just happens. Nothing to do with Fundamentals or Market news or developments. But it does.happen. Saved many from buying higher or selling lower based in this theory... Hence shared with everyone here...
Today price drop pain should end at 40¢ level where it should bounce back. Thats what i wished to convey.
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- Technical Analysis: 40¢ "GAP" still unfilled...For ones who want to average their buys.
Technical Analysis: 40¢ "GAP" still unfilled...For ones who want to average their buys., page-5
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