Dear Jaganji,
Gaps signifies important ‘event’ happened and it’s a reaction of that event that led to price opened significantly up or down.
Technically exhaustion gaps can be expected in strong trend, but cant be predicted when it will occur. Whenever stock run nonstop for many weeks experts say about 18weeks or more, such stocks first build climaxes, with gapup opening and huge volumes. These gaps are in final stage of stock cycle and called exhaustion gaps. It signified exhaustion of the trend.
Gap does have a role in Technical forecasting, but you cant predict gaps. Now the gap occurring near to base formation for accumulation/distribution are called as breakaway gaps. So they should occur at start of the trend or in the middle areas of price trend where price often consolidates for few days or so.
Regarding sunpharma, one of my critic who I really admire, is out of stock when sunpharma appeared in news. Specially Sanghvi beating ambani in wealth…such type of news….He just got recent quarters results and seen EPS falling…PAT falling…And tell you what the guy sold at 1050 in april…
One fine day, sun opened gap down, with largest volume ever in its history…and this made me understand…yes there are signs of weakness building settling in…In may stock tried to fill the gap but failed…again it made second gap down and filled the same with almost no volume comparison as seen on first gap…
So in short I don’t understand your rationale for going long on this stock…let it first mark a bottom…it will build base…until it’s a ‘V’ shaped recovery…let the volume comes in…
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Regards...
Thanks for this reply.
I think Jaganji's original question is to whether we can or cannot predict gaps and take a trade based on that data(maybe he is suggesting options data)
