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Strategies & Market Trends : From the Trading Desk -- Ignore unavailable to you. Want to Upgrade?

To: Lost in New York who wrote (3944)	12/5/1998 4:37:00 PM
From: steve goldman	Read Replies (1) \| Respond to of 4969

I;ll leave it for Alan to explain. Its his piece. -Steve

To: Lost in New York who wrote (3944)	12/5/1998 4:55:00 PM
From: TraderAlan	Respond to of 4969

Hi David, There's a traders expression: *gaps get filled. #7 says this isn't always the case. Edwards/Magee popularized gaps in Technical Analysis of Stock Trends 50 years ago. They described three types of trend gaps: breakaway, continuation and exhaustion: Breakaway: occurs as a market breaks into a new move, up or down. Continuation: as the trend goes runaway with enthusiasm or fear. Exhaustion*: as the trend burns out with one last surge. Both breakaway and continuation gaps are excellent trade entry points when the trend "pulls back" to test it for the first time. Those gaps hold support/resistance on the first test the vast majority of the time, providing a low risk, high reward trade. The exhaustion gap fills easily and is a clear warning that the trend preceding it is over. Very often, the first test of a continuation gap occurs AFTER the closure of the exhaustion gap. It's still an excellent trade entry point but the trader needs to remain aware that the subsequent rally is likely to fail before testing that closed exhaustion gap from the other side. TraderAlan aka Alan Farley editor/publisher The Hard Right Edge hardrightedge.com