Science of Stock Price Action:
When a stock creates Gap-up enthusiasm, then never ignore that stock when it comes back to fill the Gap
Gap-up enthusiasm happens when a strong fundamental news flow changes the mood/sentiment around the stock and stock opens at a price much higher than previous day high price.
Here’s a small Video: Trading Gaps
Example: Reliance stock created Gap-up enthusiasm in October 2015 after strong earnings report
Gap Filling and Rally
The base of the Gap became the Base for the stock
Source: Chartalert.com
Reliance stock post gap-up came down to fill the Gap around 910-920 many times in last 12 months and all those events turned out to be an excellent buying opportunity for short term trades. Reliance stock delivered decent trading gains on its rally from 910-920 to 1070-1120
Reliance is still a trading stock. It will become investment stock only when it clears 1150
Reliance has not crossed resistance of 1150 since June 2008 pic.twitter.com/njsbmvfdTR
— Deepak Singh (@smarket) December 13, 2016
Lesson: How to trade Gap-up enthusiasm. Here’s another example:
Will L&T stock hold the Gap enthusiasm in 2017 and rally?
Source: Chartalert.com
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers