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What is the gap?
Gap is the blank area left by the stock price opening higher or lower the next day, with the upward gap opening higher and the downward gap opening lower. Board flow may be based on this gap, for example, opening 5 points higher the next day, with the volume of transactions within a few minutes as the basis for buying or selling. If after a period of time, this gap all appears in the trading process, then it is called covering the position.
According to whether the gap is covered, it can be divided into three categories: first, it is bound to be strong if it is not covered; Second, after the replenishment, it continued to hit a new high or a new low, and its performance was average; Third, after covering, it can't hit a new high or a new low, so the original trend has turned a corner, which is weak.
Here's a question of probability. If it is to break through the gap, the stock price rarely covers it. After covering the gap between the new high and the new low, the probability of covering the gap is 50-50, but both must continue to be new high or new low, that is, at least flat. Once the gap is not high or low after replenishment, it means that the original trend has reversed, which is the characteristic of exhausted gap. Note that once there is a depletion gap, it means a certain degree of adjustment, which is at least greater than the continuous trend level when the gap appears.
In addition, there is a special situation, that is, the gap in the consolidation trend. This is different from the gap in the trend and belongs to the common gap. This gap is generally filled, and there is not much analytical significance. The only meaning is that the central shock has a goal, that is, in the process of pulling back, it is almost certain that at least the gap can be pulled back.
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Why is the gap theory effective?
Let me talk about the concept of strong pressure level first.
Why does the platform formed by K-line lateral oscillation usually have strong support pressure level or strong resistance pressure level for a period of time? The answer is actually very simple. Most people do business in that price range, so when they fall there or rise there, they will encounter strong resistance or support.
The gap and the platform are completely opposite. The platform is dense, the gap is vacuum, there is no transaction in the area where the gap is formed, and there will be no resistance when the stock price passes there. Of course, it is necessary to distinguish between gaps in trends and gaps in consolidation.
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Is gap theory effective in all markets?
Independent pricing market is very effective. What is an independent pricing market? The price is up to you. For example, A shares are a typical independent pricing market, while Hong Kong is not. Hong Kong is influenced by the mainland and US stocks, which are also independent pricing markets, so there is a big gap between US stocks.
The same is true for K-line futures. There are few gaps between coke and rebar, so we have pricing power and the replenishment rate is high. Like gold and silver, the pricing is also decided by foreigners. While we were sleeping, foreigners' gold rose by 3%. The next day, we were forced to open a big gap with it. This may not be able to make up, because our price is the shadow of others, and the shadow has no right to make up.
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Does the gap apply to individual stocks?
Yes, but individual stocks are contingent, so they are not as stable as indexes. The greater the market value of the target, the more stable the recovery probability. The success rate of using gap theory in the index is very high, because the index is composed of hundreds of stocks, its market value is extremely huge, and the coverage probability is very stable.
Of course, the gap formed by stocks such as PetroChina, Sinopec and ICBC is also relatively stable.