Link: Mid-Size Gap Ups

Apr 16, 2008: 9:30 PM CST

Rob Hanna at Quantifiable Edges conducted a study dedicated to mid-size index gaps that I wanted to share.

Rob defined a mid-sized gap as 0.25% to 0.75% in the SPY (S&P 500 ETF), and tested the results going back to 1993.

Of the 3,626 trading days, Rob found 613 “mid-sized gaps” to the upside which happened to occur in uptrends and 223 mid-sized gaps up in downtrends (his definition of up-trend was based on price being above the 200 day simple period moving average while down-trend was defined as price being beneath it).

“Of those gaps up [in an up-trend] 356 (58%) filled at some point during the day.”

“Of those mid-sized gaps up [in a down-trend], 165 (73%) filled at some point during the day.”

I love how he ends his research-based article:

“When deciding how to approach a gap up in the morning, make sure you consider at least two things:

1) Long-term trend of the market.

2) The size of the gap.

They both matter.”

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