Here's an interesting insight from William D Gann in this book,
Truth Of The Stock Tape.
What can we expect on Mondays? The markets are sepereated into two types of market participants. The sharks and the sheeps. I refer to the sharks as the professionals and the sheeps to the general public who buy or sell on based on news. The sheep are usually the late comers; buying after a rally or shorting after a decline.
In his book,
Truth of The Stock Tape, Gann mentions that a market that has been strong all week and closes strong on Friday has a good chance to rally at the open on Monday. This is due to public buying and orders placed at the market based on the weekend news of a bullish market. Hence, the market will tend to rally for the first hour. However, as soon as the demand is supplied the professionals or sharks will start selling causing a market reaction. The key here is to wait for the dips after the first hour.
In a declining market that has been weak the entire week and closes weak on Friday, the market has a good chance to sell off in the first 30 -60 minutes of the trading session. After the public selling pressure is gone, the professionals will start buying causing a rally. Therefore the key is to buy after the reaction.
In relation to this concept above, Gann also describes the attitude of a typical sheep. A losing trader may receive a margin call early in the day. The trader must liquidate his position by market close or put up more money for margin. The losing trader will tend to hold throughout the day hoping for a correction. However, the correction never comes and he is forced to liquidate his position at the last hour. This causes the markets to weaken as plenty of other traders are doing the same. Once the supply is gone the market corrects itself.
A little interesting piece of information. Thought I'de share it with you all
