gap down Archives | Bulls on Wall Street

6 Types of Stock Gaps: How to Day Trade the Market Open

Nick P — Wed, 19 May 2021 19:41:57 +0000

Every day there are thousands of stocks gapping up and down.

Stocks gapping in pre-market offer some of the best opportunities for day trading and swing trading. No matter what type of trader or investor you are, you need to understand stock gaps.

Today we will give you an introduction to stock gaps, and the different ways stocks will behave.

Let’s start by defining what a stock gap is:

What is a Stock Gap?

A stock gap is simply a change in a stock’s price from its prior close. In pre-market and after-hours trading, stocks can rise and fall in price.

Sometimes press releases can cause large gaps in either direction, as a larger number of buyers and sellers enter the market.

It is called a “gap-up” when a stock trades higher than it’s prior closing price. For example, If Amazon $AMZN closes at $3200 and then opens the next day at $3300, that is a gap up.

It is called a “gap-down” when the opposite happens. If $AMZN closes at $3400 and opens at $3100, that is a gap down.

Now let’s get into the different types of patterns you will during a gap up or gap down:

Gap & Go

A gap & go is when a stock gapping up continues the upward momentum when the market opens. You see this kind of momentum when a stock gaps up over nearby by resistance levels, eliminating potential areas of supply to halt the stock’s uptrend. A stock gapping up to all-time highs is often the type of stock that

Gap & Crap

This is when a stock reverses strongly after the market opens after gapping up pre-market. Stock’s that do this will often fill their gap, and test nearby support levels from pre-market, and on the daily chart. A gap-and-crap will often occur when a stock has an especially large gap up, or gaps into resistance levels.

Gap Down Continuation

The opposite of a gap and go. This is where a stock continues its downward momentum from the pre-market. Typically stocks that gap down and continue lower gap below nearby support levels, eliminating potential areas of demand that would bring buyers back into the stock.

Gap Down Reversal

The opposite of a gap and crap. These reversals typically occur when a stock gaps down into areas of support, or it is strong uptrending stock.

Gap and Chop

Choppy stock gaps will typically occur after the merger and buy-out catalysts. We personally don’t recommend trading stocks with these type of catalysts. In general, we prefer to trade stock gaps that have liquid pre-market action, ideally forming a trend we can join at the market open.

Summary

Learn patterns to trade each type of stock gap (besides the chop!). If you want to see how we trade these types of gaps, register for our upcoming free chatroom day and watch veteran day trader Kunal Desai trade live on screen-share!

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What To Do When A Momentum Stock Gets Crushed Off Bad News (Boeing)

Paul Singh — Mon, 22 Apr 2019 14:21:22 +0000

today’s video, I show you exactly what to look for when a stock gaps down on bad news. Key learning points include:

The nature of the gap down
The post selloff range
Key support levels
Upcoming news events

So watch, learn and put this strategy into practice. Remember members of the swing service get all of these trade alerts intraday in real time. This swing trading service is great for those that work and can’t monitor the computer all day. We have in-depth nightly reports on the game plan for the day/week and all stock picks that I trade will be alerted and emailed to you. Check out the Swing Service HERE Follow me, Paul Singh AKA “TheMarketSpeculator” on Twitter or email me at SinghJD1@aol.com.]]>

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Post Earnings Drift – Marrying Fundamentals With Technicals

Kunal Desai — Mon, 08 May 2017 21:00:47 +0000

Our favorite type of trading throughout the year is earnings season. If you’re familiar with our style, you’ll know that a lot of it is based off news and momentum. Ideally we take the fundamentals, such as company news or earnings release, and marry it with what we know about the stock’s technicals to get our perfect intraday entries.

Gap Down on $KITE

On May 8^th, we made a great trade on Kite. We never place these trades before earnings, because that would make us gamblers and not traders. Instead we wait for the news then trade after the release. What we saw today in KITE is called a post earnings drift and a very powerful move.

Looking at its daily chart, Kite has been in a tight wedge for months, but today it had an earnings statement out. After scanning for gappers in the morning, KITE showed up on our radar. Once I see the gap and the market opens, I don’t immediately short it but I wait for an intraday pattern. One of my favorite patterns to play is the opening range breakdown and KITE developed one in the first five minutes. As the stock broke down I shorted it at $73.26 for a few hundred shares and boom! We immediately got this drop down to $71 and I covered my position into it. Opening Range Patterns are meant to be quick and it will happen in minutes.

As our day starts to progress, we wait for secondary patterns. As the stock started to retrace I’m just looking for the next bear flag. Once it broke the trendline, I shorted another 300 shares and first spike down I cover 100 shares, then another 100, and then the next. The stock gave us yet another bear flag immediately after for the next opportunity.

That’s the awesome thing about earnings plays. Once the stock is in play, it gets a huge volume spike due to the news. Fresh news have order flow that’s independent from the market and so you’re actual intraday patterns will work cleaner and faster than regular technical patterns. Every day, we’re looking for gappers to play.

If you’re not sure of the steps and practices that we’re talking about you can learn them all here at our Bulls Bootcamp. It’s an intensive 60 day course to teach you exactly how I trade and why. To learn more or signup, email me at kunal@bullsonwallstreet.com today!

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How to play the Gap Down For A Short

Kunal Desai — Sat, 01 Apr 2017 17:31:53 +0000

Not long ago, we talked about one of our favorite setups, the Gap and Go. But did you know the exact same principles can be applied in the opposite direction? On March 30^th, we played LULU for a Gap and Go, but in the short direction. When this stock came out with bad earnings, it got slammed in premarket trading causing it to gap down by more than twenty percent! This stock was immediately placed on the top of our watchlist for the best shorting opportunities of the day.

LULU Gap Down

When trading stocks you always need to be patient and disciplined, and the same rules apply when you’re entering for a short. Wait for the pop, don’t jump in right away. Once the stock opened, it popped to $53. But then it started to roll over and dip below the intraday chart’s 9EMA and the VWAP. Once the price broke underneath, it was the spot to short. A few students saw the setup and called it out at 52.30! If you missed that move you could’ve shorted it when it broke the lows of the opening range breakdown underneath the $51.75 level.

Later on, LULU had a few more setups for some strong gains. Throughout the morning it had trouble overtaking the VWAP and continued to show weakness. Eventually, the stock couldn’t take it anymore and by 10:45AM, all support levels were broken. It continued to fade the rest of the day all the way down to $50.50. Even after the initial move takes place, always keep a hot stock on your radar. You never know how much you can end up making!

If you’re not sure of the setups and price patterns that we’re talking about you can learn them all here at our Bulls Bootcamp. It’s an intensive 60 day course to teach you exactly how I trade and why. To learn more or signup, email kunal@bullsonwallstreet.com today!

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How to trade when a stock you are holding gaps down

Paul Singh — Wed, 10 Jun 2015 16:02:09 +0000

Swing traders who manage their risk properly fear little, because they know they are masters of minimizing losses. Losses are no big deal, unless the stock you are holding gaps down against you. Dealing with the gap down is what separates the pros from the amateurs. You must keep your cool and analyze what’s going on, what news the gap down is based upon, price action and the pivot low, along with your own risk parameters.

In this video I show you how to handle a gap down like a pro, using my own current position GoPro (GPRO).

https://youtu.be/k2usGWgRfb0

Come check out our FREE TRIAL for our Part Time Traders service. This service is great for those that work and cant monitor the computer all day. We have indepth nightly reports on the gameplan for the day/week and all stock picks that I trade will be alerted and emailed to you.

https://bullsonwallstreet.com/swing-trading/

Follow me on twitter or email me at SinghJD1@aol.com

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