This guide provides an overview on how to use gap and gapdb.com tools for trading and investing.
An up gap is recorded when the low of trading day is higher than the high of previous trading day (day -1).
A gap is filled in subsequent trading days when the low of that day is, for the first time since gap day, lower or equal to the high of day -1.
Some people often refer to "open gap" as their definition of "gap". An "open gap" is recorded when the open price is higher than the high of previous trading day.
Open gaps are very common, often filled on the same day, less significant signal. I don't use open gaps at all on gapdb.com outside of this introductory section. All gaps on gapdb.com use the low(t) > high(t-1) definition.
GapDB only cares about up gaps. I don't have any statistics about down gaps.
Since the stocks and companies we care are all sound companies and their prices have overall long term uptrend, most “down” gaps should have got filled.
If a stock has down gap that is not filled, that stock will probably go to zero and the company must be a low quality company that one should stay away.
When a stock price gap is observed, by a chance of 91~92% it will get filled in the future. In layman’s word, 9 in 10 gaps get filled; not always, but pretty close.
For more details on the statistics of gap filling, please read my article: Statistics: Do Stock Price Gaps Always Get Filled?
Hypothesis: Outlier has high chance to regress to average.
High unfilled gaps.
If you need ideas to identify gap outliers, GapScan provides a convenient way to discover
In a bull market: High: due for correction, wait Low: due to rise, confident to buy
Bear: Not yet known. Probaly all depressed.
All & SP500 NASDAQ100 Biotech Sectors
When
Buyout