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Stocks & Commodities V. 25:7 (32-34): Laps And Gaps To Get Your Edge by Larry Connors and Ashton Dorkins
Stocks & Commodities V. 25:7 (32-34): Laps And Gaps To Get Your Edge by Larry Connors and Ashton Dorkins
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Laps And Gaps To Get Your Edge by Larry Connors and Ashton Dorkins
When a stock gaps higher at the open on bullish news, will that lead to even higher prices?
When a stock gaps higher at the open on bullish news, will that lead to even higher prices? This is the question that many traders ask before the market opens. You watch the financial news in the morning and hear a list of stocks set to open higher due to positive news overnight. Then you see a live report from the floor of the exchange that shows traders gathered around the post where XYZ stock is traded. Youre told that stock is due to open 10% higher from the previous days close. And its all accompanied by a great story. If you already own it, youre probably thinking you couldnt ask for better news. And if you dont own XYZ, you may be wondering if you should buy the stock. But In the final minutes before opening bell, you begin to recall instances in which stocks like this one actually closed lower by the end of the day. How that is possible with such bullish news?
QUICK REVIEW OF LAPS AND GAPS
Recently, we conducted new quantitative research on laps and gaps. We looked at the relationship between a stocks opening price and closing price on the previous day. To draw valid conclusions, we analyzed more than seven million trades from January 1, 1995, to June 30, 2006.
When a stock gaps higher at the open on bullish news, will that lead to even higher prices?
When a stock gaps higher at the open on bullish news, will that lead to even higher prices? This is the question that many traders ask before the market opens. You watch the financial news in the morning and hear a list of stocks set to open higher due to positive news overnight. Then you see a live report from the floor of the exchange that shows traders gathered around the post where XYZ stock is traded. Youre told that stock is due to open 10% higher from the previous days close. And its all accompanied by a great story. If you already own it, youre probably thinking you couldnt ask for better news. And if you dont own XYZ, you may be wondering if you should buy the stock. But In the final minutes before opening bell, you begin to recall instances in which stocks like this one actually closed lower by the end of the day. How that is possible with such bullish news?
QUICK REVIEW OF LAPS AND GAPS
Recently, we conducted new quantitative research on laps and gaps. We looked at the relationship between a stocks opening price and closing price on the previous day. To draw valid conclusions, we analyzed more than seven million trades from January 1, 1995, to June 30, 2006.
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