Here is an interesting chart of a breakout gap from a 4 day consolidation. What alerted me of a potential change and a bullish bias was the consolidation on April 2nd, 2007.
After 3 days of wide swings (100pt): 3/28, 3/29, 3/30.... the April 2nd range was 50 points and closed near the upper range for the day. This immediately alerted me of a break in pattern compared to the past 3 sessions.
Notice on April 3rd, 2007 we get a breakout gap above the 3/30 high and top of the congestion area. The breakout gap also occurs at a key psychological level at 12500.
Whats also important is that the following day, the market cleared 12600 without a fight. (see dialy chart attached) Here is a quick breakdown of the breakout gap:
Those who are long and planned to short at 12500 are no longer involved since the markets gapped up. In other word, thoese who played the lower bracket and went long now are more optimistic since prices gapped above 12500. Second, sellers waiting for the second attempt at 12500 are no longer existent. A good way for the pros to eliminate supply is to gap the markets up above it. This stops the shorts from stepping in.
