Study Guides
Study Guide: Measuring Gaps

UPSIDE MEASURING GAPS:

While QE was occurring many measuring gaps failed.

Now when a stock gaps up or down, and doesn't fill the gap, a symmetrical move can be expected.

Measure from the previous move, and add it to the new LOW if it's an upside gap, subtract it from the new HIGH if it's a downside gap.

Measuring gaps have consistently appeared on daily and 78 minute charts.

2 BIG RULES:

1) The measuring gap should not be after a protracted move in the stock.

2) If the volume on a daily chart is climatic this could indicate an exhaustion gap.

DOWNSIDE MEASURING GAPS:

Downside measuring gaps frequently overshoot to the downside.

Psychologically speaking, downside gaps are usually accompanied by a sort of panic, hence the possibility of an overshoot.

TRADING MEASURING GAPS:

There are many types of gaps, Chris focuses on measuring gaps.

Measuring gaps happen after a move in the same direction of the gap.

Use 2 charts when analyzing stocks after news/events.

One for all the pre market and after market activity.

The second for only trading hours.

Identify prior support and resistance areas.

Use stops for normal trading hours at support areas during pre-market activity.