[brownsfan019]

This is more of a price action / plotting support/resistance type chart, but we are in the candlestick corner and it's my area.



Here is May 28th chart after I marked it all up. The basic premise is old resistance becomes new support and vice versa.

[sevensa]

Hi Brown

Maybe a bit off topic, but you opened the door with your candle commets... Feel free to move somewhere else to keep this thread on track with gaps.

I've only been using very basic candle patterns up to now and is trying to expand a bit on that. When you say at point 2 that there were nice looking candle reversals, what are you looking at? Is it the two small bodies showing uncertainty after the wide up bar followed by the engulfing looking down bar that happened at the right place, i.e. against a possible resistance zone?

[BlowFish]

I think you ordered the AL Brooks book Brown? (I did too). In his presentations he talks about gaps, he is neutral on direction until price action dictates it. however his observation is that gaps frequently result in trend days (one direction or the other).

[brownsfan019]

Originally Posted by sevensa »

Hi Brown

Maybe a bit off topic, but you opened the door with your candle commets... Feel free to move somewhere else to keep this thread on track with gaps.

I've only been using very basic candle patterns up to now and is trying to expand a bit on that. When you say at point 2 that there were nice looking candle reversals, what are you looking at? Is it the two small bodies showing uncertainty after the wide up bar followed by the engulfing looking down bar that happened at the right place, i.e. against a possible resistance zone?

Not off topic at all. Hell, it's mainly me talking to myself here so I welcome all company.

In regards to your question - at point #2 on the referenced chart, I see 3 very bearish/indecisive candles (spinning top, spinning top, bearish inverted hammer thing). The names of the candles are irrelevant in my eyes. What I see is 2 candles of indecisiveness and then a very bearish candle, ALL OCCURRING AT A RESISTANCE LEVEL. That's the only reason I would be interested in shorting here - we are testing the previous high which was also where a gap short (that worked) occurred. I would be willing to short there w/ a stop just above that HOD and see what happens. The risk/reward there is great.

[brownsfan019]

Originally Posted by BlowFish »

I think you ordered the AL Brooks book Brown? (I did too). In his presentations he talks about gaps, he is neutral on direction until price action dictates it. however his observation is that gaps frequently result in trend days (one direction or the other).

BF - thanks for sharing that as haven't read anything this week w/ some illness I'm fighting.

If you can expand more, please do. Curious to hear what he has to say on gaps.

[BlowFish]

The book didn't arrive in time for my weekend away, however the free info (linked in the other thread) has a wealth of information. I don't know why but I thought you had ordered the book too?

He pretty much does what you have mentioned and that is look for strength or weakness in the first couple of bars/candles after the gap. He doesn't make any assumption on direction (fill or further move in the gap direction) but his observation is that gaps often lead to strong trends so he gets ready for that eventuality.

[dancorcal]

Hi Guys,

I found this somewhere, and thought it could be useful. It states the half gap fill is 80% winner. Of course you will still need correct money management (i.e. position size, stop loss) to make it profitable. Keep the ideas coming.

[brownsfan019]

If you can assume an 80% win rate, then this has very strong potential. Cutting losses is key.