Master Traders know that gaps set up swing trading as well as intraday gap trading opportunities.

However, the gap is only a starting point for the analysis.

In the last couple of weeks, there were good examples of a morning gap being a starting point for a gap trading opportunity.

There are gaps every day that could be gap trading setups, but many are not high odds setups to "go with" or "go against" the gap.

Multiple technical analysis points make for a high-odds setup to go with or go against the gap.

Here I will explain the main point to “go against” the gap.

A major part of the Master Trader Seven Point Gap Analysis System is, where are prices gapping to?

Bottoming Tail candlesticks within an uptrend tell us that buyers took control on the dip.

And that dip was right into an area of price support. So, the formation of that BT candlestick made total sense.

That candlestick pattern will have traders holding overnight, expecting higher prices. And as we can see, prices gapped higher the next day.

Master Trader Tip:

Price patterns are pictures of traders’ beliefs and expectations that they have created with money.

In the chart above of the Dow Jones Industrial Average ETF symbol DIA, on January 24, prices were gapping higher from a Bottoming Tail (BT) candlestick.

As already mentioned, the gap is a starting point for consideration of a gap trading opportunity. That gap higher was right into a cluster of overlapping candlesticks to the left. It was also a Pivot High (PH).

We know that there are going to be sellers on the open because that is a trading tactic of buying a bullish reversal candle at the close and selling in the morning when it gaps in the direction of that candlestick.

The fact that there was an area of price congestion to the left increases the probability that there are going to be sellers.


This analysis is the starting point for our gap trading analysis.

As an intraday trader, we now need to see a new candlestick pattern form telling us that sellers are taking control that morning.

While not shown here, if you to look at your five-or 15-minute intraday chart of DIA, you will see how the distribution started immediately.

Once prices couldn’t hold the support below (the gap), prices continued lower throughout the day. The day ended with a bearish Wide Range Bar (- WRB) that Friday.

What happened on Monday morning?

A -WRB suggests that prices will go lower, but not to the extent that they did on Monday morning.

The size of the gap down was significant. A large gap down does not mean that prices can’t go lower, which many traders believe.

This large gap lower was right to an area of Major Support (MS) as well as a prior Pivot Low (PL).

A gap down of that size into MS - and creating a price void above - is a high probability situation where buyers are going to step up. Some will be covering shorts (bearish positions), and others will buy at support.

These two gap examples are the starting point in your analysis that can lead you to excellent opportunities.

Support and Resistance are two foundational technical analysis concepts to any trading plan. Support tells us where there’s going to be demand (buyers) and resistance tell us where there’s going to be supply (sellers).

The combination of gap analysis and intraday trading candlestick patterns provides excellent opportunities for traders wanting to generate income.

The same price patterns that we use on a daily chart apply to an intraday chart. The combination of these time frames is essential to finding high odds intraday gap trading opportunities and explained in AGS.

If you’re interested in trading gaps daily, the Master Trader Advanced Gap Trading Strategies (AGS) course will teach you an exact step-by-step systematic method of trading gaps each day.

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Master Trader and You Building Your Financial Future Together!


Happy trading!  If you have any questions or comments,

please e-mail Greg Capra at Greg@mastertrader.com or Dan Gibby at Dan@mastertrader.com

All the best,

Greg Capra
Managing Director of Master Trader

Dan Gibby
Chief Options Strategist