Chapter 8. Gaps and the Market

This chapter analyzes gaps in relation to overall market movement. Some days have an extremely high number of gaps. The gaps on these high gap days are tipped heavily in one direction. For example, there might be 599 gaps on one day, with all but 3 of them being up gaps. Does this situation point you toward certain trading strategies? Does it give you a clue as to which direction the market might be headed? A different question related to market movements is: Should prior market movements alter your interpretation of individual stock gaps? For example, is there a difference in how you might interpret a gap down for a stock if the market is already trending down? These are some of the questions this chapter explores.