| Edwards/Magee popularized gaps 50 years ago in Technical Analysis of Stock Trends. The old masters described three types of trend gaps found in most stock charts. The first is a breakaway gap that often appears when a market begins a new trend move, up or down. It should print on high volume that sharply exceeds the 60-bar VMA. This gap offers an excellent pullback trade if price returns to test it. It holds S/R the vast majority of the time and identifies low-risk, high-reward entry. Markets often retest breakouts very quickly after they occur. If successful, price will move sharply away from the pullback level.
|
