Morning Star Gap Reversal Guideline Requirements
- A stock that has a consistent trading range of at lease 1.75 points.
- Stocks that have a decent spread. Although a stock is often entered with an ECN, a trader does not
want to be severely hurt by the spread. Stocks should also have an adequate number of market makers
to allow for cushion.
- The stock should be down at least two days in a row before it becomes a consideration.
- Open of the current day MUST be in the top 25% of the day's price range.
- Close of the current day MUST be in the bottom 25% of the day's price range.
- Above average volume on the current day is preferable.
Next trading day's ACTION
- If the stock gaps up on the open (at least 1/2 point to one point) above yesterday’s closing price, buy
it immediately. If a trader misses that entry, buy when it trades above its first one-half hour high.
Market makers should be buying the stock as well.
- Stop/loss should be 1/8 to 1/4 below yesterday’s low.
- Look closely at the chart to determine an average and reasonable profit amount, or decide on a dollar
amount that is reasonable for the stock and get out at that point. If the market and or sector remain
strong and a trader is in very positive territory, the trader should hold it for the next day or two.
Evening Star Gap Reversal Guideline Requirements
- A stock that has a consistent trading range of at lease 1.75 points.
- Stocks that have a decent spread. Although a stock is often entered with an ECN, a trader does not
want to be severely hurt by the spread. Stocks should also have an adequate number of market makers
to allow for cushion.
- The stock should be up at least two days in a row before it becomes a consideration.
- Open of the current day MUST be in the low 25% of the day's price range.
- Close of the current day MUST be in the top 25% of the day's price range.
- Above average volume on the current day.
Next trading day's ACTION
- If the stock gaps down at the open (at least 1/2 point to one point) below yesterday’s closing price,
sell it short immediately. If a trader misses that entry, sell it short when it trades below its first onehalf
hour low. Market makers should be selling the stock as well.
- Stop/loss should be 1/8 to 1/4 above yesterday’s high.
- Look closely at the chart to determine an average and reasonable profit amount, or decide on a dollar
amount that is reasonable for the stock and get out at that point. If the market and/or sector remain
weak, a trader is in very positive territory and should hold it for the next day or two.
...Trading gaps Part 5
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