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Technology Stocks : Qualcomm Incorporated (QCOM) -- Ignore unavailable to you. Want to Upgrade?

To: Jon Koplik who wrote (12820)	7/23/1998 12:54:00 AM
From: Jon Koplik	Respond to of 152472

More about these "gaps." Part of this can be explained by an example. Assume June Live Cattle are trending up, and have a high for the move of 71.25, and close at 71.00 on a given day (the same day that 71.25 was touched). The next day, the opening (actually, the opening range, because we are talking futures, not stocks (another topic, not for right now)) is 71.75 - 72.00. If this scenario occurred, pretty much all "old-timers" would recommend to someone looking to establish a new long to wait and try to get in around 71.25, BECAUSE there is a gap from 71.25 to 71.75. One explanation I've heard for this is : these guys in the cattle pit see each other all day, every day, and despite wanting to do anything to remove money from each other's pockets, will, in a market situation such as the one described above, just somehow MAKE the market go back to 71.25 for at least one trade, so as to let anyone who went home net short the night before have at least ONE chance to un-wind the trade without getting "hosed" too badly. I know this sounds crazy, but if you look at zillions of charts, it is amazing how few gaps there are. WHEN there is a gap, it supposedly has some significance. I'm just going to copy the text from my 1985 copy of The Chicago Board of Trade's Commodity Trading Manual (which is a 382 page hard cover book, by the way). This is from page 100 : The common gap can appear at any time and has no particular significance. Frequently this gap is "filled" in later trading. The breakaway gap is useful in predicting the end of a consolidation phase of the market, and it can herald a dynamic move to follow. Runaway gaps appear after an extensive move, and some chartists believe that their appearance marks the midpoint in the major move. Exhaustion gaps occur after a relatively long period of steadily higher or lower prices. As the name implies, chartists feel that the exhaustion gap signals the imminent end of a trend. Then, there is a (hypothetical) chart, showing examples of all four types of gaps. The breakaway gap looks exactly like yesterday's and today's price action on QCOM, so ... we shall see ... (By the way, despite being aware of some of this stuff, I personally NEVER trade based on "charts.") Jon.