Sunday, April 06, 2008

Gaps: Technical Analysis term

"In today's markets, many stocks can have large supply-demand imbalances at the opening bell. Often, these imbalances result in what are known as "gaps", when the opening price is higher or lower than the preceding close.

News, in various forms, is generally the catalyst for gap openings. The most common type is macroeconomic news such the release of economic indicators such as unemployment,Inflation figures,or stock-specific news such as earnings surprises or analyst upgrades or downgrades…"


What is a gap?
A gap is defined as a price level on a chart where no trading occurred. These can occur in all time frames,we are mostly concerned with the daily chart.

A gap on a daily chart happens when the stock closes at one price but opens the following day at a different price.

This happens because buy or sell orders are placed before the open that cause the price to open higher or lower than the previous day's close.

Filling The Gap
In Japanese Candlestick Charting gaps are referred to as windows. When we say that a stock is "filling a gap", the Japanese would say that the stock is "closing the window".

Sometimes you will hear traders/idiots like me say that stock is "filling a gap" or say that a stock has "a gap to fill".They are talking about a stock that has traded at the price level of a previous gap.

when stock is gapped up/down. A few days later it rallies back up/down and fills in the price level at which there were previously no trades. This is known as filling the gap.

Sometimes you will hear traders saying that "gaps always get filled". This just simply isn't true. Some gaps never get filled, and sometimes it can take years to fill a gap.

learn more here or google term "trading gaps":
http://www.incrediblecharts.com/technical/gaps.php
http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:gaps_and_gap_analysis
http://stockcharts.com/school/doku.php?id=chart_school:trading_strategies:gap_trading_strategies

14 comments :

Uma said...

***** => MMB style

S S Cheema said...

Thanks jaggu -- that's very nice of you.
cheema

S S Cheema said...

WOW jaggu -- went through the sites and gaps are phenomenal. didn't know that such things existed. Wonderful learning that i will cherish for a long time.
Cheema

niftyxl said...

to uma:
thanks :)

to cheema:
u r most welcome,:)

Uma said...

only stock that didn't turn around = REL.

niftyxl said...

uma & cheemaji,
i wont b able to update the charts or post technicals for few days,since i m suffering from fever :(

hope u will forgive me :)
with love,
jaggu ;)

preet said...

Get well soon. May the markets remain where they are till you recover ;-)
Cheema

Uma said...

arre!! everybody is falling sick :(
me not feeling too well either...k rest up buddy! And congrats on your 7th Apr prediction - on the dot!

Uma said...

CAUTION === CAUTION=== CAUTION

Do NOT click link provided by ''fenrisar'' above.
It will attempt to install spy software to your PC. I had to do a hard restart to stop the download.

uma

niftyxl said...

thanx dear :)
i m recovering slowly will be back from next week...

till then keep an eye on bad boys..ROFL

Uma said...

LOL. yeh of course get well soon buddy!

Uma said...

Howz my buddy feeling now?
Miss your great analysis of each session and your accurate interpretation of technicals, always given in such a humble manner.
God bless.

S S Cheema said...

missing you jaggu ji. had to declare a holiday on monday lest you have some bahana for not posting technical s for monday not being well or something. (;-))
get well soon, witing for your analysis for the comming week.
Cheema

niftyxl said...

to uma:
i m feeling well now.i will post techs as soon as i finish making the chart.

to cheema:
chooti to bahana hai,aapko kulfi jo khana hai,
to monday ko declare karo chooti,aur bolo jaggu ko chooti dedo ;)

sabr ka phal hamesha kulfi se meetha hota hai ;)

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