Gaps Flashcards
Identify where the gaps are on the chart
What is a Gap?
Any space between the current price and any Support/Resistance
- High, Low, Open, Close of any bar
- Moving Averages
- Trend lines
- Can be very minor
What does Gap Up mean?
Low of current bar is above the high of prior Bar = Sign of Strong Bulls
(common gap)
What does Gap Down mean?
High of current bar is below the low of prior Bar = Sign of Strong Bears
(Common Gap)
What is a Gap early in a Trend called?
a Break away Gap
What is a Gap in the middle of Trend called?
a Measuring Gap
*Not until the market gets near target
What is a Gap at the end of a Trend called?
Exhaustion Gap
*Not certain until it “closes”
*See the chart below were the exhaustion Gap rally closed the gap
Explain what this highlighted Gap closing is telling me?
This was a BULL Reversal Trend BO Bar but there was still a Gap between the Close of the prior Bar and the close of the Bull Reversal Bar. The follow-through Bar than closed this gap. This tells me that the Bulls are increasing the buying pressure which increases the odds of this being a MTR and start looking to enter the market LONG
Every gap is a Trend Bar
TRUE OR FALSE?
True
Can a BULL Measuring Gap lead to a Measured Move?
Yes, it can
Can a BEAR Measuring Gap lead to a Measured Move?
Yes, it can
When gaps form late in trend, after 10 - 20 bars, it can be either
____________ or ____________
Measuring Gap or Exhaustion Gap
What is the big Bull Trend Bar at the end of this trend?
The big BULL TREND BAR at the end of this Bull trend is the Biggest BULL bar in this 30 bars bull trend and is usually the Exhaustion gap that turns the trend into a BULL FLAG or evening a TR after 5-10 bars … Meaning if turns into a TR it is a 50/50 chance of breakout to either side. Usually, an exhaustive move does not mean the market is going to reverse it just means the BEARS/BULLS are exhausted and the market will no go sideways for a bit(TR) until the BEARS OR BULLS decide who is going to take over.
What did this Gap in the middle of the Trend become?
Became a Measuring Gap
What did this Gap at the end of the Trend become?
Once the Gap closed it became an Exhaustion Gap
Bull Trend with 20 or more bars above MA finally has one or more bars completely below MA (There is a Gap between MA and high of bar)
What does it usually lead to before a correction attempt?
It usually leads to final rally before correction attempt.
What percentage of major trend reversals succeed and what percent become bull flags or TR?
40% of MTR succeed
&
60% become bull flags or TRs
Why are the BEARS getting stronger on this chart?
- There is a Bull Trend in the context (40 Bars above)
- MAG is between MA and high of bar
- Bears strong enough to put bar below MA
MAG in Bull often leads to Final Bull Leg
Identify the Below MA gaps that are signaling strength for the Bears?
Gap 1 is below to the right with the first red circle
Gap 2 is below to the far right
The bears were able to close price below the MA for a 2nd time
MAG in Bull often leads to Final Bull Leg what are the Bears doing here too increase the probability of an MTR correction?
The Bears are closing Bars/Price below the MA weaken price and giving strength to the BEARS.
Bears are creating Gaps below MA
Here the finally Rally/Leg up before the MTR created a DT LH MTR; 40% chance of a Bear swing
Bear Trend with 20 Bars below the MA with one or more Bars completely above the MA, (Gap between MA and low of Bar)
What does this mean?
This means the Bulls are gaining strength and usually leads to one more sell-off (rally) before correction attempt.
- 40% of MTR succeed
- 60% become bear flag or TR
Bear Trend with about 30 bars below MA, MAG gap between MA and low of bar
What do gap bars usually lead to before correction attempt?
They usually lead to final leg of bear trend before the correction attempt. Bulls finally strong enough to put the entire bar above MA.
LL MTR, Wedge 40% chance of bull swing, like here
Gap Late in Bull Trend, possible Bull Exhaustion Gap
Bull has gone 10 or more bars
Big Bull bar closing near high, often series of 2 or more bars
Where are the Gaps in this possible bull exhaustion Gap late in Bull Trend?
Gap is close of Bull Bar and High of Prior Bar
Gap is low of PB and high of BO point (BO PB Gap)
*1st target is bottom of Buy Climax
*Bears want Exhaustion Gap, and ten Bar, Two Leg(TBTL) Reversal down
Is this strongest Bull Bar in over 20 bars more likely a Buy Climax and Exhaustion Gap at end of the Trend
OR
a Measuring Gap and start of new leg up?
This is more likely to be a Buy Climax Exhaustion Gap at end of trend due to it being the biggest bar in the trend in over 20+ Bars and the Reversal Trend Bar follow - through.
The exhaustion Gap was closed which confirms the exhaustion gap
*Bottom of Buy Climaxx is usually 1st profit target for Bears
Exhaustion Gap is sometimes 3 or more Bars
What has to happen to confirm the Exhaustion Gap in this market Price Action on this chart?
Price has to fall below the top of BO point and close the Exhaustion Gap
*The MM would be the measurement of the Buy climax for additional downside Bear targets
Bear Exhaustion Gap often Biggest Bear Bar in 20 Bars closing near its low
At support, BO fails and is followed by Reversal Up.
Identify the Gaps on this chart and potential Long targets
Gap between close and prior lows
BO PB Gap
*All Gaps closed therefore NOW big Bear bar is an Exhaustion Gap Bar
- 1st target is top or sell Climax
3 Bar BO too MM that contains strongest Bear Bar(s) in over 20+ bars (Biggest bear body closed on its low)
Is this more likely to be a Sell Climax and Exhaustion Gap at end of Trend
OR
Measuring Gap and start of a new leg?
More likely to be Sell climax Exhaustion Gap which means a pause in the Trend or a Eventual Reversal up TBTL which is more likely on this chart to occur.
*Rallied above bottom of all 3 BO points & above low if prior bar, Gaps from the exhaustion Bar Gaps are now closed confirming the Exhaustion Gap Bar
*Also rallied above top of Sell Climac, as it usually does after exhaustion
Most micro gaps do not have predictive value but they do help to identify the increase of buying pressure.
TRUE OR FALSE?
This is true
Most gaps have no predictive value but they do help to show the increase in buying pressure.
If the Micro Gap(s) stays open the trend is stronger
With these micro gaps being closed in this Bull trend what does that mean for the Bulls?
Bulls no longer able to keep gaps open
Bulls losing control
Higher prices less likely
Bull Micro Gaps are closing
vs
Bear Micro Gaps are staying open
What is more likely to happen?
With the Bear, Gaps staying open and Bulls closing with the PB falling below of bottom gap lower prices are likely.
If the gaps stay open they are a sign of pressure and the trend is likely to continue.
Bears no longer able to create gaps
Bears losing control
Lower prices less likely
What needs to happen to increase the odds of the price going up?
Bull Gaps need to stay open in the transition of the Bear Gaps closing and this increases the odds of higher prices
Gap open Bull Bar
If a bar opens above or below close of prior bar, it is a Gap Open Bar
What kind of Gap is this?
No gap
Open of 2nd bar is exactly at close of prior bar
Gap open Bull Bar
If a bar opens above or below close of prior bar, it is a Gap Open Bar
What kind of Gap is this?
Gap up: Open of 2nd bar os above close of 1st bar
Gap open Bull Bar
If a bar opens above or below close of prior bar, it is a Gap Open Bar
What kind of Gap is this?
Gap down: Open of 2nd bar is below close of 1st Bar
Gap open Bear Bar
If a bar opens above or below close of prior bar, it is a Gap Open Bar
What kind of Gap is this?
No Gap
No gap open of 2nd bar is exactly at close of prior bar
Gap open Bear Bar
If a bar opens above or below close of prior bar, it is a Gap Open Bar
What kind of Gap is this?
Gap down: Open of 2nd bar is below close of 1st bar
Gap open Bear Bar
If a bar opens above or below close of prior bar, it is a Gap Open Bar
What kind of Gap is this?
Gap up: Open of 2nd bar is above close of 1st bar
Gap open Bear Bar
If a bar opens above or below close of prior bar, it is a Gap Open Bar
What kind of Gap is this?
Gap up: Open of 2nd Bar is above close oof 1st Bar
Gap Open Bars, why is buying the close in this bull trend successful?
Gap up and bull bar after bull bar
Higher prices likely
Buy the close every open at or above prior close
Gap open Bars
explain what is going on here
You are good !
Gap open Bars have predictive power
Any kind of GAPS are a sign of strength, they’re a sign of EAGER traders (BUYERS-BULLS/SELLERS-BEARS)
- GAPS UPS = Sign of BULL BUYING PRESSURE markets likely to go higher
- GAPS DOWN = Sign of BEAR SELLING PRESSURE markets likely to go lower
Is this a sign of Bulls or Bears strengthening?
This is a sign of Bulls Strengthening
*When the bulls resume after a PB from a BO, without pulling back below the BO point bears could not close the gap). bulls buy more, and bears wait to sell
This means that there are usually many more bars left to the trend
Traders often take profits at where?
Measured Moves (MM)
MM here = bottom on BO Point to middle of gap up
Explain why these are negative gaps?
A GAP between the Bodies… a PB Bar, if its body does not overlap a Body of a BO Point Bar (Trend Bar)
What is another term used for a negative gap?
Body gap
If gaps stay open for long what do they often lead to?
They can lead to a big move
After a strong BO, gap between PB and BO point is
very important sign of strength, and can be a Measuring Gap
A Measuring Gap can be a sell Vaccum down to support
What did the Bears and Bulls do at the bottom of the Measuring Gap?
Bears took profit and Bulls bet on a reversal
Big Bar later in trend is usually an Exhaustion Gap, but sometimes becomes a Measuring Gap, Especially when Tight Bear Trend, very little Bull Bars, I have to be looking to sell.
What would make the price continue to the downside?
The Gaps that were created in the bars were not able too close, which is telling me there is still Bear buying pressure = SELL
Only Trade with the Trend
As long as PBs create gaps in a trend what is expected of the market?
Still in BO Phase
Trend still Strong
Only trade with the trend
Define the stairs pattern? (Gaps that close)
If all the GAPS are closing Traders will start to scalp against the TREND / a sign a Trend is weakening and possibly transitioning into a TR or maybe even a new TREND
What were the bears not able to do on this chart?
Bears could not close gaps
Weak bears, strong bulls
Only Buy!
