V.15:13 (581): Quick Scans: Trading the Rebound Gap by John Sweeney

Quick Scans: Trading the Rebound Gap by John Sweeney

With the proliferation of trading systems on heavyweight hardware and software has come the decline of simple systems you can use with just a pencil. With no public evidence that rocket science has changed the investment world, it might be profitable to look at something you can actually understand, such as Trading the Rebound Gap.

A rebound gap is formed when a tradable opens beyond the previous day’s range (that is, higher/lower than the previous day’s high/low), then closes within the previous day’s range. The gap evinces that the market is moving aggressively at the opening, then being pulled up short and retreating back into the previous day’s price range. It’s a curtailment of speculative enthusiasm. Exploiting this psychological phenomenon is the subject of Richard Bearse’s book.