Gap Continuation Breakouts by Ken Calhoun
The objective of all traders is to find a market-beating strategy. The challenge is to find ones that are consistent. We all know that gaps create profitable trading opportunities, but what if they don’t continue? Here are some techniques that will help you identify profitable gap-trading opportunities.
It's no secret: The strongest technical breakout signals are found following gaps (also known as “windows”) when traded in the direction of the gap. When you combine basic gap entries with volume, bullish cups, and momentum candlestick patterns, you get even better entry signals. After all, gaps occur when premarket institutional buying or selling is significantly strong prior to the opening bell, which causes price to open far away from the prior day’s close.
Swing and intraday traders who want to capitalize on gap-trading opportunities need to have a solid understanding of the technical price–action patterns that work best when gaps occur...