Tip #7. The gap and trap price pattern
All gaps are important "tells" on any stock chart. But, there is one type of gap that is especially important when analyzing price action (and pinpointing reversals). This is called a gap and trap. This is a stock that gaps down at the open but then closes the day above the opening price. It is easier to see this on a chart...
You can probably see what is happening here. The stock gaps down at the open. Everyone thinks this stock is going to tank. But it doesn't! Buyers come in and move this stock right back up. You can look at one of these candles and almost see all of the confused faces on other stock traders!
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