Regardless of the market environment, stocks will gap daily.
When there have been no trades between the previous day or days, a supply-demand imbalance creates a gap.
We teach Gap types/strategies and how to read the supply-demand imbalances candlestick patterns of gaps using MTS bar-by-bar analysis:
Stocks “in the news” or during earnings season which gap provide great trading opportunities each day.
However, not all gaps are tradable, and many bearish gaps fail, setting up contrarian bullish gap trades.
In this lesson, we are going to teach you how to trade a particular bearish gap that has “no follow-through” to the bearish message of the gap. Instead, it sets up in a particular way that is bullish.
MTS “failure patterns” are one of our most powerful trading concepts.
Let us show you the Master Trader Bearish Gap That Bullies Gap Setup!
Each starts with a bearish gap. In this example, it gapped below bullish consolidation in a downtrend. The “message” was continued lower prices.
However, what happened? After a negligible dip lower at the open, it ripped to fill the gap. That’s bullish; the bearish message has been fully negated – quickly.
Ideal Bearish Gap That Bullies Gap Setups negates the bearish gap within the first 30-60 minutes after the market opens and closes with a bullish Wide Range Bar (+WRB) near the day’s high.
Thereafter, as with all Master Trader Setups, you need a bullish pattern – and Price Void (i.e., a lack of significant price resistance to the left). This example had both!
Master Trader Tip: The more MTS concepts in alignment, the greater the odds of the trade moving in the direction of the turn.
The following day’s +WRB Breakout on the 15-Min. chart was an ideal entry as it was from a bullish consolidation for almost six hours from the prior day.
Here are two such patterns with Airbnb (ABNB) and DoorDash (DASH).
Both reported earnings, and had a negative gap that quickly filled the gap, leaving bullish patterns:
Here is the daily of Airbnb:
Here is the daily of DoorDash:
Although both are bullish, DASH is a better continuation pattern since it was a closing multi-month breakout with price void.
They are ideal for Bearish Gap That Bullies Setups since the bullish inside bar(s) is a bullish consolidation within a bullish setup.
DASH is on our long watch list this week for the reasons discussed.
We teach high-probability Gap setups using Master Trader Strategies (MTS), to trade within the first hour with stocks and ETFs daily.
Trading gaps is a fantastic strategy for those just wanting to trade the market open with ease!
Learn 7-Step Rating System to trade Gaps on anything! CLICK HERE
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
