Gauging Gaps by Thomas Bulkowski
Should you trade the gap? Here are some gap performance numbers to help you decide.
Suppose you’ve been following a chart pattern. Say prices gap upward, piercing the trendline in a breakout. Do you buy the stock, expecting an unusually large gain? How long will it be before prices return and close the gap? I will address those questions here.
Prices gap when today’s high is below yesterday’s low, or today’s low is above yesterday’s high. A chart of the pattern will show a gap between the prices.