Link: Mid-Size Gap Ups
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.”