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To: Boplicity who wrote (9348)	1/26/2001 2:38:14 PM
From: John Madarasz	Respond to of 13572

On Gaps... Greg as you know there are many types of gaps, but on a purely defined real investor point of view, a gap up on the open is caused when there is a trade imbalance between buy and sell orders. Of course many professional firms who trade the stock in question see this demand premarket, and trade ahead of it I imagine by distributing shares short in excess of real inventory. In this case these gaps would need to be filled strictly from a "balanced book" standpoint in regards to a professional standpoint. As far as what is going through investors "minds" causing gaps to fill, I would have to think that gaps are in essence a pyschological but very real starting point. When greed, excitement or whatever fades after the initial gap up, prices tend to drift lower as impulse buyers and traders sell or get stopped out. I also think there is a large contingent of professional traders who very often fade these gaps, knowing that the initial price jump is unwarranted or overdone, and will eventually re-trace... so that would add short pressure to the event causing gaps to fill. Breakaway and continuation gaps are much different I think, and since they are often followed by longer term price appreciation, they take longer to fill. I think market conditions often dictate when and if these gaps close too. Other than the very real issue of inventory rectification, who really knows what is going on pyschologically that causes these gaps in price to close. One thing I do know though is that for whatever reason, they have the tendency to fill, and that that is a very real thing. The more you study and become familiar with them, the more useful they become as a juju thing<g> I can recommend the Elder book, "Trading for a Living" though. This guy who wrote the book is a practising psychiatrist and trader, and there is some good in depth stuff on gaps. I'm still studying the phenomena of gaps, but they have been very helpful for me when used with several other micro and macro indicators for timing entries. Did you see my edits to my ntap post to you? There are a few more fundamental things I put in that might cause at least one of the gaps to fill there... John