1. Understand the gap form.
When novices first come into contact with technical analysis, they may think that "gap" is a very profound technical form. In fact, the gap is very simple, it is the price blank area in the K-line chart, that is, when the stock price rises or falls, this price is skipped. According to the direction of the gap, the gap can be divided into two types: upward gap and downward gap.
Next, we will explain these two types of gaps respectively and teach you to find short-term opportunities through gap patterns.
2. The gap pattern of upward jump.
In two consecutive K lines, if the highest price of the previous K line is lower than the lowest price of the next K line, and there is a blank area between the two K lines, then this blank area The area is called an upward gap.
An upward short jump indicates that there is sudden buying power in the market, which will push the stock price upward strongly.
According to the location of the gap and the subsequent trend, we can divide upward gaps into four categories: breakthrough, continuation, support, and exhaustion.
Let’s explain these four major types of gap forms one by one.
1. Breakthrough upward jump gap:
When the stock price breaks through an important price, an upward jump gap appears, then this short jump gap is a breakthrough upward jump gap. The important price levels here can be moving averages, trend lines, previous highs, etc.
This breakthrough upward gap shows that the multi-party forces in the market have concentrated in the short term, and the stock price will continue to rise in the future. Seeing this signal, short-term investors can actively buy.
2. Continuous upward jump gap
If the stock continues to rise, forming a gap, and then the stock continues to rise without filling the gap, then such a gap is called a sustained upward jump gap.
A continuous upward jump indicates that the stock price continues to rise and will continue to rise in the future. At this time, short-term investors can actively pursue high prices and buy stocks.
3. Support-type upward jump gap:
The stock forms a gap during its rise, and then the stock price falls back, but it rebounds upward every time it falls back to the gap position. This shows that the gap has a supporting effect on the stock price. When the stock price falls back to the position near the gap again, it is a good time to buy. Short-term investors can seize this opportunity to buy.
4. Exhaustion-type upward jump gap.
The stock price formed a gap during its rise, but within the next few trading days, the stock price fell quickly to fill the gap. Then, at this time, we call this gap a depletion-type upward jump. Vacancy. This shows that the rise in stock prices has encountered strong resistance, and the stock price will trend downward in the future. At this time, short-term investors should sell their stocks promptly.
3. The gap pattern of downward jump. If
the stock price rises, a gap will be formed. Then, if the stock price falls, a gap will naturally form. In two consecutive K lines, if the highest price of the latter K line is lower than the lowest price of the previous K line, then the gap formed at this time is a downward gap.
Depending on the location of the gap and subsequent stock price trends, we can also divide downward gaps into four categories: breakthrough, continuation, resistance, and exhaustion.
Next, we will also introduce the downward gaps of these four categories.
1. Breakthrough downward gap.
When a downward gap appears and the stock price breaks through important support levels such as the moving average, rising trend line, and previous lows, we call this gap a breakthrough downward gap. .
A breakthrough downward gap indicates that the seller's power in the market is very strong, and the stock price will fall in the future. Therefore, once short-term investors see this signal, they should sell their stocks in time.
2. Continuous downward gap.
If a gap is formed during the continuous decline of the stock price, and then the stock price continues to fall and does not rise to fill the gap, then we call this gap a continuous downward gap. gap. This is a signal that the stock price continues to fall. Short-term investors should sell their stocks in time when they see this signal.
3. Resistive downward gap:
The stock forms a gap in the process of falling, and then the stock price rebounds, but it is blocked downward after returning to the gap position, which shows that the gap has a resistance to the stock price. At this time, we call this downward gap a resistance downward gap. The appearance of this pattern indicates that the stock price will continue to fall in the future, and investors should sell their stocks in time.
4. The stock
price formed a gap in the process of falling, but then the stock price rose quickly to make up for the gap. At this time, we call this gap a depletion downward jump gap, which means that the stock price When it fell, it received strong support from many parties, and the market will rise subsequently. Short-term investors should actively buy at this time.
Okay, that’s it for now on how to find short-term opportunities through gap patterns. I hope it will be helpful to you.
Finally, I still have to remind you that although the gap pattern can help us find short-term buying and selling opportunities, it is not 100% effective. In the actual investment process, we also need to make comprehensive judgments based on information. The stock market is risky, so be cautious when entering the market!