Full Gap Up Openings - A Visual Study
This is a visual study on full gap up openings. During the period November 2010 to April 2011, there were 17 occasions where we had full gap up openings. I wanted to look at the respective days intraday chart and get some idea on what exactly happens during the rest of the day. I prepared 17 charts in Excel. All are based on 5 minute data of Nifty Futures. The first three candles are the last 15 minutes action of the previous day. These charts are numbered Chart 1 through Chart 17. Just to give you an idea of the kind of market phase during this period, first I will post an EOD chart. All these 17 days are marked on this chart so that you get a clear idea on where the gap up happened. After that we will move on to those 17. So, here we go.
I'm still working on the past data and will post some quantitative results but looking at the above charts it is clear that we can't make any rules on how to trade these gaps. For example, if you make a rule like - " If the market opens full gap up then buy at the open with a 20 point stop" This rule "worked" on chart examples 1,3,5,7,10 and 14 but has failed on other days. So the bottom line seems to be that every day has to be treated on its own merit. You may study these charts and then come up with your own conclusions and please do post them in the comments section.
A similar study on full gap downs during the above period is underway but I'm too tired now and I will post that study later.
Curtesy : http://www.timamo.blogspot.in
