Gaps

Question 1

What is a Gap?

Answer 1

Any space between the current price and any Support/Resistance

• High, Low, Open, Close of any bar
• Moving Averages
• Trend lines
• Can be very minor

Question 2

What does Gap Up mean?

Answer 2

Low of current bar is above the high of prior Bar = Sign of Strong Bulls

(common gap)

Question 3

What does Gap Down mean?

Answer 3

High of current bar is below the low of prior Bar = Sign of Strong Bears

(Common Gap)

Question 4

What is a Gap early in a Trend called?

Answer 4

a Break away Gap

Question 5

What is a Gap in the middle of Trend called?

Answer 5

a Measuring Gap

*Not until the market gets near target

Question 6

What is a Gap at the end of a Trend called?

Answer 6

Exhaustion Gap

*Not certain until it “closes”

*See the chart below were the exhaustion Gap rally closed the gap

Question 7

Explain what this highlighted Gap closing is telling me?

Answer 7

This was a BULL Reversal Trend BO Bar but there was still a Gap between the Close of the prior Bar and the close of the Bull Reversal Bar. The follow-through Bar than closed this gap. This tells me that the Bulls are increasing the buying pressure which increases the odds of this being a MTR and start looking to enter the market LONG

Question 8

Every gap is a Trend Bar

TRUE OR FALSE?

Answer 8

True

Question 9

Can a BULL Measuring Gap lead to a Measured Move?

Answer 9

Yes, it can

Question 10

Can a BEAR Measuring Gap lead to a Measured Move?

Answer 10

Yes, it can

Question 11

When gaps form late in trend, after 10 - 20 bars, it can be either

____________ or ____________

Answer 11

Measuring Gap or Exhaustion Gap

Question 12

What is the big Bull Trend Bar at the end of this trend?

Answer 12

The big BULL TREND BAR at the end of this Bull trend is the Biggest BULL bar in this 30 bars bull trend and is usually the Exhaustion gap that turns the trend into a BULL FLAG or evening a TR after 5-10 bars … Meaning if turns into a TR it is a 50/50 chance of breakout to either side. Usually, an exhaustive move does not mean the market is going to reverse it just means the BEARS/BULLS are exhausted and the market will no go sideways for a bit(TR) until the BEARS OR BULLS decide who is going to take over.

Question 13

What did this Gap in the middle of the Trend become?

Answer 13

Became a Measuring Gap

Question 14

What did this Gap at the end of the Trend become?

Answer 14

Once the Gap closed it became an Exhaustion Gap

Question 15

Bull Trend with 20 or more bars above MA finally has one or more bars completely below MA (There is a Gap between MA and high of bar)

What does it usually lead to before a correction attempt?

Answer 15

It usually leads to final rally before correction attempt.

Question 16

What percentage of major trend reversals succeed and what percent become bull flags or TR?

Answer 16

40% of MTR succeed

&

60% become bull flags or TRs

Question 17

Why are the BEARS getting stronger on this chart?

Answer 17

• There is a Bull Trend in the context (40 Bars above)
• MAG is between MA and high of bar
• Bears strong enough to put bar below MA

Question 18

MAG in Bull often leads to Final Bull Leg

Identify the Below MA gaps that are signaling strength for the Bears?

Answer 18

Gap 1 is below to the right with the first red circle

Gap 2 is below to the far right

The bears were able to close price below the MA for a 2nd time

Question 19

MAG in Bull often leads to Final Bull Leg what are the Bears doing here too increase the probability of an MTR correction?

Answer 19

The Bears are closing Bars/Price below the MA weaken price and giving strength to the BEARS.

Bears are creating Gaps below MA

Here the finally Rally/Leg up before the MTR created a DT LH MTR; 40% chance of a Bear swing

Question 20

Bear Trend with 20 Bars below the MA with one or more Bars completely above the MA, (Gap between MA and low of Bar)

What does this mean?

Answer 20

This means the Bulls are gaining strength and usually leads to one more sell-off (rally) before correction attempt.

• 40% of MTR succeed
• 60% become bear flag or TR

Question 21

Bear Trend with about 30 bars below MA, MAG gap between MA and low of bar

What do gap bars usually lead to before correction attempt?

Answer 21

They usually lead to final leg of bear trend before the correction attempt. Bulls finally strong enough to put the entire bar above MA.

LL MTR, Wedge 40% chance of bull swing, like here

Question 22

Gap Late in Bull Trend, possible Bull Exhaustion Gap

Bull has gone 10 or more bars

Big Bull bar closing near high, often series of 2 or more bars

Where are the Gaps in this possible bull exhaustion Gap late in Bull Trend?

Answer 22

Gap is close of Bull Bar and High of Prior Bar

Gap is low of PB and high of BO point (BO PB Gap)

*1st target is bottom of Buy Climax

*Bears want Exhaustion Gap, and ten Bar, Two Leg(TBTL) Reversal down

Question 23

Is this strongest Bull Bar in over 20 bars more likely a Buy Climax and Exhaustion Gap at end of the Trend

OR

a Measuring Gap and start of new leg up?

Answer 23

This is more likely to be a Buy Climax Exhaustion Gap at end of trend due to it being the biggest bar in the trend in over 20+ Bars and the Reversal Trend Bar follow - through.

The exhaustion Gap was closed which confirms the exhaustion gap

*Bottom of Buy Climaxx is usually 1st profit target for Bears

Question 24

Exhaustion Gap is sometimes 3 or more Bars

What has to happen to confirm the Exhaustion Gap in this market Price Action on this chart?

Answer 24

Price has to fall below the top of BO point and close the Exhaustion Gap

*The MM would be the measurement of the Buy climax for additional downside Bear targets

Question 25

Bear Exhaustion Gap often Biggest Bear Bar in 20 Bars closing near its low At support, BO fails and is followed by Reversal Up. Identify the Gaps on this chart and potential Long targets

Answer 25

Gap between close and prior lows BO PB Gap \*All Gaps closed therefore NOW big Bear bar is an Exhaustion Gap Bar * 1st target is top or sell Climax

Question 26

3 Bar BO too MM that contains strongest Bear Bar(s) in over 20+ bars (Biggest bear body closed on its low) Is this more likely to be a Sell Climax and Exhaustion Gap at end of Trend OR Measuring Gap and start of a new leg?

Answer 26

More likely to be Sell climax Exhaustion Gap which means a pause in the Trend or a Eventual Reversal up TBTL which is more likely on this chart to occur. \*Rallied above bottom of all 3 BO points & above low if prior bar, Gaps from the exhaustion Bar Gaps are now closed confirming the Exhaustion Gap Bar \*Also rallied above top of Sell Climac, as it usually does after exhaustion

Question 27

Most micro gaps do not have predictive value but they do help to identify the increase of buying pressure. TRUE OR FALSE?

Answer 27

This is true Most gaps have no predictive value but they do help to show the increase in buying pressure.

Question 28

If the Micro Gap(s) stays open the trend is stronger With these micro gaps being closed in this Bull trend what does that mean for the Bulls?

Answer 28

Bulls no longer able to keep gaps open Bulls losing control Higher prices less likely

Question 29

Bull Micro Gaps are closing vs Bear Micro Gaps are staying open What is more likely to happen?

Answer 29

With the Bear, Gaps staying open and Bulls closing with the PB falling below of bottom gap lower prices are likely. If the gaps stay open they are a sign of pressure and the trend is likely to continue.

Question 30

Bears no longer able to create gaps Bears losing control Lower prices less likely What needs to happen to increase the odds of the price going up?

Answer 30

Bull Gaps need to stay open in the transition of the Bear Gaps closing and this increases the odds of higher prices

Question 31

Gap open Bull Bar If a bar opens above or below close of prior bar, it is a Gap Open Bar What kind of Gap is this?

Answer 31

No gap Open of 2nd bar is exactly at close of prior bar

Question 32

Gap open Bull Bar If a bar opens above or below close of prior bar, it is a Gap Open Bar What kind of Gap is this?

Answer 32

Gap up: Open of 2nd bar os above close of 1st bar

Question 33

Gap open Bull Bar If a bar opens above or below close of prior bar, it is a Gap Open Bar What kind of Gap is this?

Answer 33

Gap down: Open of 2nd bar is below close of 1st Bar

Question 34

Gap open Bear Bar If a bar opens above or below close of prior bar, it is a Gap Open Bar What kind of Gap is this?

Answer 34

No Gap No gap open of 2nd bar is exactly at close of prior bar

Question 35

Gap open Bear Bar If a bar opens above or below close of prior bar, it is a Gap Open Bar What kind of Gap is this?

Answer 35

Gap down: Open of 2nd bar is below close of 1st bar

Question 36

Gap open Bear Bar If a bar opens above or below close of prior bar, it is a Gap Open Bar What kind of Gap is this?

Answer 36

Gap up: Open of 2nd bar is above close of 1st bar

Question 37

Gap open Bear Bar If a bar opens above or below close of prior bar, it is a Gap Open Bar What kind of Gap is this?

Answer 37

Gap up: Open of 2nd Bar is above close oof 1st Bar

Question 38

Gap Open Bars, why is buying the close in this bull trend successful?

Answer 38

Gap up and bull bar after bull bar Higher prices likely Buy the close every open at or above prior close

Question 39

Gap open Bars explain what is going on here

Answer 39

You are good !

Question 40

Gap open Bars have predictive power

Answer 40

Question 41

Any kind of GAPS are a sign of strength, they're a sign of EAGER traders (BUYERS-BULLS/SELLERS-BEARS) * GAPS UPS = Sign of BULL BUYING PRESSURE markets likely to go higher * GAPS DOWN = Sign of BEAR SELLING PRESSURE markets likely to go lower Is this a sign of Bulls or Bears strengthening?

Answer 41

This is a sign of Bulls Strengthening \*When the bulls resume after a PB from a BO, without pulling back below the BO point bears could not close the gap). bulls buy more, and bears wait to sell This means that there are usually many more bars left to the trend

Question 42

Traders often take profits at where?

Answer 42

Measured Moves (MM) MM here = bottom on BO Point to middle of gap up

Question 43

Explain why these are negative gaps?

Answer 43

A GAP between the Bodies... a PB Bar, if its body does not overlap a Body of a BO Point Bar (Trend Bar)

Question 44

What is another term used for a negative gap?

Answer 44

Body gap

Question 45

If gaps stay open for long what do they often lead to?

Answer 45

They can lead to a big move After a strong BO, gap between PB and BO point is very important sign of strength, and can be a Measuring Gap

Question 46

A Measuring Gap can be a sell Vaccum down to support What did the Bears and Bulls do at the bottom of the Measuring Gap?

Answer 46

Bears took profit and Bulls bet on a reversal

Question 47

Big Bar later in trend is usually an Exhaustion Gap, but sometimes becomes a Measuring Gap, Especially when Tight Bear Trend, very little Bull Bars, I have to be looking to sell. What would make the price continue to the downside?

Answer 47

The Gaps that were created in the bars were not able too close, which is telling me there is still Bear buying pressure = SELL

Question 48

Only Trade with the Trend As long as PBs create gaps in a trend what is expected of the market?

Answer 48

Still in BO Phase Trend still Strong Only trade with the trend

Question 49

Define the stairs pattern? (Gaps that close)

Answer 49

If all the GAPS are closing Traders will start to scalp against the TREND / a sign a Trend is weakening and possibly transitioning into a TR or maybe even a new TREND

Question 50

What were the bears not able to do on this chart?

Answer 50

Bears could not close gaps Weak bears, strong bulls Only Buy!