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Clint wrote:
"Question: is that pattern sufficiently common or reliable enough to justify
taking a long position on the failure to close the gap, or is it more
prudent to wait until the high of the morning is taken out?"
Seems that, sometimes at least, if the opening gap isn't closed, then you
can see a pretty good rally in the direction of the gap. Might pay to get on
board early."
Clint,
While I don't have concrete stats to back up my observations (but with years
of experience watching this phenonmena in many futures markets) that anytime
a market sluggishly (subjective I realize) attempts to close a gap or will
quickly close a gap (within 10 minutes) then rebound, I consider that a
suffucuent signal to go long. Moreover, if a market moves sideways for say
the first hour of trading after gapping above the high of the previous day,
then this is a strong signal to go long. What it tells me is that bulls are
being extremely aggressive and supporting price cause you know there's got
to be sellers and suddenly higher prices like that. Coffee "C" was a
perfect example of this last Monday.
I'm looking at a 5' chart of the OEX Fri (11/13) and I don't see that gap
open. My first bar 6-6:35 shows an O=548.47 H=549.49, L=548.37, C=549.49.
The previous day's close was around 548.56. According to this the market
actually opened lower then immidiately rallied -- very significantly -- with
gaps between the 1' bars (I'm looking at 1' now).
If you remove the first bar 5 bars on the 1' chart (look at a 5' chart and
remove the first bar) then the market did exactly what you said it did.
Perhaps I'm not plotting all my data or something like that is hapnning on
your end. At any rate, anytime a market suddenly jumps and doesn't sell
off, I consider that a good signal. But it needs to be quickly confirmed in
the direction of the gap.
Brian.
-----Original Message-----
From: Clint Chastain [mailto:flag@xxxxxxxxxxxx]
Sent: Saturday, November 14, 1998 6:25 PM
To: Omega List
Subject: Gap Openings
Last Friday, on my 1 min chart of the OEX, I saw a small upside gap opening
(as expected), followed in due course by a contra-opening move (as expected)
but which failed to close the gap (not expected). Then prices rallied back
to the high of the morning and drifted there for some minutes before
breaking out to the upside. And you know how the day finished up.
Question: is that pattern sufficiently common or reliable enough to justify
taking a long position on the failure to close the gap, or is it more
prudent to wait until the high of the morning is taken out?
Seems that, sometimes at least, if the opening gap isn't closed, then you
can see a pretty good rally in the direction of the gap. Might pay to get on
board early.
Clint
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