Gaps, Open of Day and Size of B1

Open near HOY, LOY or COY

- Expect a possible AM trend of unknown direction preferably after taking out HOY, LOY or COY
- BO traders buy above HOY and sell below LOY
- Faders sell above HOY and buy below LOY
- Traditional institutions buy/sell at COY
there is one trick to COY in the sense it only works for the direction of the prior days trend i.e. if the last
move was up, a reversal works only up

- Value traders buy below/sell above PM Trading Ranges

Open mid-range
- if we had a large day prior day and the open is mid-range such as 4/30, expect poor AM trading
- mid-range open with a doji is the most difficult for AM trading, expect poor AM trading
- mid-range trend bar, some chance we can still see an AM trend unless bar is too large
- strong trend bar on a mid-range open often leads to a move to an end of the prior day and usually
turns around unless the move ends in a strong BO

Size of Gap
no gap = b1 overlaps b81 -> continuation from prior day

small gap = one or two recent bars -> continuation from prior day

moderate gap = one or two recent swings (about half a recent day)
-> can lead to trend in either dir.

large gap = one recent day or larger day -> hard to trade
BO traders enter, faders might be discouraged
might continue in the direction of the gap (large gaps often get extended rather than
reversing)
weak attempt to reverse -> continue trend
good attempt to reverse -> channel against gap

Size of Bar 1
- less than 2 pts -> not good
- 2 to 3 pts -> could be a normal or large day (ideal size)
- 3 pts but less than 4 -> could lead to large trend
- 4 pts or larger -> TR
Setups

bear gap
- 2 failed attempts to go up is a very strong signal
- possible fH2 on gap down day, can be a fH2 var. (IB for fH1) – count from extreme
- mW (IBs) or W
- XT, also on M15
- 2fBO, 2fb1 (needs large gap-therefore rarer)
- no trade against gap, unless above EMA and fL2 or H2, that tests EMA (strong attempt to close the gap)
- strong mid-size RVB to close moderate to large gap (e.g. BB LOY)

bull gap
- look for a 2 push PB to EMA or a 3 push PB (mW (IBs) or W) – count from extreme ??
- 2fBO, 2fb1 (needs large gap-therefore rarer)
- 2 failed attempts to go up is a poor signal
- 2 failed attempts to go down is also a poor signal
- no trade against gap, unless strong reversal (e.g. PW) or below EMA and fH2 or L2, that tests EMA
(strong attempt to close the gap)
- strong mid-size RVB to close moderate to large gap (e.g. SA HOY)

no gap (or small gap) one or two recent bars

- when there is no gap, essentially it can be treated as a continuation of prior day
- may work better in the entry direction of the last move from prior day
i.e. if last move prior day was a bull leg, two failures to sell may work
- you want two failures counter to prior days last move
- e.g. DP, fH2…

mid range
- buy below/sell above PM Trading Ranges (2nd attempt – 2nd fBO)
- RVB at or near EMA (not too large, otherwise can be a TR)
- 1fB1 and 2fB1
- test of a SB/EB from prior day
- DT, DB with prior days swing
- RVB for G, G2

When the market opens near HLC, b1 is a moderate sized trend bar at a moderate gap,
your chances of trending, getting clean bars and entry without being stopped out are
the highest
Gaps, Open of Day and Size of B1