The Gap Strategies written by Scott McCormick
A Gap occurs when today's opening price is either greater than yesterday's high price
(Gap Up) or less than yesterday's low price (Gap Down) . There are six primary
strategies used to play Gaps, four with Buy criteria and two with short criteria. They are
as follows:
Full Gap Down: Buys
If a stock's opening prices is less than yesterday's low, set a buy stop equal to two ticks
more than yesterday's low.
Modified Gap Down: Buy
If a stock's opening price is less than yesterday's low, revisit the 1 minute chart after
10:30 am and set a buy stop equal to the average of the open and low price achieved in
the first hour of trading. This method recommends that the projected daily volume is
double the 5 day average.
Full Gap Up: Buy
If a stock's opening price is greater than yesterday's high, revisit the 1 minute chart after
10:30 am and set a buy stop equal to two ticks above the high achieved in the first hour
of trading.
Modified Gap Up: Buy
If a stock's opening price is greater than yesterday's high, revisit the 1 minute chart after
10:30 am and set a buy stop equal to the average of the open price and the high price
achieved in the first hour of trading. This method recommends that the projected daily
volume is double the 5 day average.
Gap Up: Short
If a stock's opening price is greater than yesterday's high, revisit the 1 minute chart after
10:30 am and set a short stop equal to two ticks below the low achieved in the first hour
of trading.
Gap Down: Short
If a stock's opening price is less than yesterday's low, revisit the 1 minute chart after
10:30 am and set a short stop equal to two ticks below the low achieved in the first hour
of trading.
A 'tick' is defined as the bid/ask spread, usually 1/8 to 1/4 point, depending on the
stock.
One can assess the profitability of this method against any recent gapping stocks - see
the 5 minutes charts.
lastshadow
A Gap occurs when today's opening price is either greater than yesterday's high price
(Gap Up) or less than yesterday's low price (Gap Down) . There are six primary
strategies used to play Gaps, four with Buy criteria and two with short criteria. They are
as follows:
Full Gap Down: Buys
If a stock's opening prices is less than yesterday's low, set a buy stop equal to two ticks
more than yesterday's low.
Modified Gap Down: Buy
If a stock's opening price is less than yesterday's low, revisit the 1 minute chart after
10:30 am and set a buy stop equal to the average of the open and low price achieved in
the first hour of trading. This method recommends that the projected daily volume is
double the 5 day average.
Full Gap Up: Buy
If a stock's opening price is greater than yesterday's high, revisit the 1 minute chart after
10:30 am and set a buy stop equal to two ticks above the high achieved in the first hour
of trading.
Modified Gap Up: Buy
If a stock's opening price is greater than yesterday's high, revisit the 1 minute chart after
10:30 am and set a buy stop equal to the average of the open price and the high price
achieved in the first hour of trading. This method recommends that the projected daily
volume is double the 5 day average.
Gap Up: Short
If a stock's opening price is greater than yesterday's high, revisit the 1 minute chart after
10:30 am and set a short stop equal to two ticks below the low achieved in the first hour
of trading.
Gap Down: Short
If a stock's opening price is less than yesterday's low, revisit the 1 minute chart after
10:30 am and set a short stop equal to two ticks below the low achieved in the first hour
of trading.
A 'tick' is defined as the bid/ask spread, usually 1/8 to 1/4 point, depending on the
stock.
One can assess the profitability of this method against any recent gapping stocks - see
the 5 minutes charts.
lastshadow
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