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Strategies & Market Trends : Market Gems:Stocks w/Strong Earnings and High Tech. Rank
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To: Adelle who wrote (30110)3/29/1999 11:50:00 PM
From: Jenna  Read Replies (3) of 120523
 
Gappers: Time element is not as important as the VOLUME after the gap. A gap is a very important indication that you stock has in fact broken out. Obviously this means that buying demand is very high, especially if the gap is followed by swelling volume.

The gap means you are at the BEGINNING of a price move and not the end. It usually follows a breakout of a chart formation like a breakout of an ascending triangle, head & shoulders formation, cup & handle, etc.

An earnings play is different since the breakout is specifically as a result of the earnings report and the stock might conceivably sell off as profit takers who have been accumulating on anticipation decide to sell off on the 'news'. (i.e. buy on the rumour sell on the news).

If I held the stock through earnings and the gap is significant than I would in fact think of a sell (i.e. MIKE and AMES were both up significantly after their report) and I would not think to re-enter that day. I don't think that earnings plays are quite the same becuase its the anticipation that builds up the stock and then the 'news' itself before might be the anticlimax.

Knowledge of the historical price patterns of your stock will tell you that your 'gap' will probably bring the stock much higher, so then I rarely sell on a morning gap. The occasions when I do sell is if the gap is on the second or third day of an extraordinary price rise like in NITE or NTBK. The only way to know if your gapped stock will stop gapping and provide you with an opportunity to get in, is to closely watch the volume on each tick or the 1 -5 minute charts.

The kind of stocks I follow do not usually fill gaps and give you entry possibilities. If you check the volume of each transaction as the prices move away from the gap and if there is indication that volume has significantly decreased than maybe you hae a chance to get back in. But the time element is unimportant for me and too mechanical. The VOLUME is what is important. I can safely say that unless volume drops off significantly your gap will not fill whether you wait for 1/2 hour or 1/2 day. I would get in and have done.
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