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DaveLandry
07-23-2015,
I've been reading up on gaps. I read about the three main types of gaps and generally where and why they might happen. But I'm not really getting why alot of traders feel a gap 'must' be filled. Read something else about if a gap never fills then people aren't sure if a trend is really ended or something to that effect. But I don't get that. What exactly are the consequences if a gap never gets filled?

Saw somewhere that someone said that's actually a myth and that it's not technically true that they must be filled, but that generally traders "abhor" gaps. They hate them in other words. Why? And why do people want them to be filled?

daxogixl54
07-24-2015,
there are no consequences to any technical indicator that fails except that the equity may move in a different direction that you believed. I don't think anyone could say that any technical indicator MUST do anything but the odds are better that the market will follow a pattern. If you look at a few stock charts with gaps in them, more often than not they do get filled IMHO. I believe that a more accurate statement would be that the market abhors a gap much like nature abhors a vacuum. Traders tend to use gaps just like any other indicator..as a signal ;)

Dave Landry
07-25-2015,
Thanks Doc for your reply! That helps me some. But I guess that's also where I'm llost, because I'm not exactly seeing how a gap is a failure of an indicator. I understand your vacum example but, I don't see how a gap will cause a trader to think something else might happen down the road other than what they might have believed, if still following all the other indicators as normal.

The best way I can illustrate my confusion would as follows.

Say, I'm going down the highway at a good cruising speed of 60 MPH or whatever, and I come up over a steep hill and for about 1 or 2 seconds my car goes airborn and misses about 3 feet of pavement but comes down and resumes normally on it's way, I'm not going to worry about that 3 feet of pavement where my tires didn't meet the concrete because I'm still going to go down the road to my destination no differently than if I'd stayed completely earth bound as I went over that hill.

That's how I look at a gap at this point, considering I don't know enough about them.

I get confused when I hear someone look at a chart and say, "oh today it closed that gap that appeared a month and a half ago, so now the stock should do this or that."

I guess in my mind I'm thinking,"what difference does it make"?

I'm a beginner, so I ask alot of questions when I'm trying to learn and not grasping something that I read up on or heard somebody say. Hope you all will bear with me. Thanks much for your help

Dbigg
07-25-2015,
Normally when there is a type of gap either up or down there will usually be at some time a type of correction in the stock. Just like any over or undervalued stock. The best thing to do when encountering a gap is to check out the behind the scenes issues to see if you can figure out why a gap was created. They could come from a bad PR, missing a target price, exceeding a target price and/or something extraordinarily good or bad happened.

After a gap has happened there are usually trends and supports that will form to give you an indicator if the gap may fill.

Learning what trend lines are and finding out what breakout plays are you can find tons of examples of gaps and figure out the trends to see if and when and how the gap filled.

There are lots of reasons for gaps and looking at financials and news reports are usually great for finding out why.

dbrysgbs09
07-27-2015,
Quote:
But I guess that's also where I'm llost, because I'm not exactly seeing how a gap is a failure of an indicator.
no no, failing to fill a gap is a failure of that gap as an indicator. I do look at gaps and some examples of it can be seen on ONT...it gapped up, came back down to fill the gap and is now moving back up. If I had the money, I'd have bought into it when it filled the gap and would have made some nice green since and in the future.
SPAR will show you an example of a gap that didn't fill. I don't think that it is going to go back down and fill it now so I missed a good entry point on it by waiting for it to go down when it just kept climbing upward