Today's Gap Plays - Thursday, July 2
Happy July Gappers!
As of 9:10 am ET, indices are showing extremely large gaps "down" pre-market in the D-L zones except for the Dow which closed 'up' yesterday and thus is showing a U-L (a.k.a BLUD!) zone gap.
Gap Fade Risks:
1) Very low historical probabilities/PF for these setups (i.e. these zones, on Fridays, during similar market conditions)
2) Many high risk patterns for gap fading are firing today: opening below S1 (and possibly S2), opening below 600 mas on 5 min chart, prior day formed a shooting star candle pattern for the Dow and S&P (note: ES formed a doji too), etc.
3) last day prior to a long weekend can generate additional post-open volatility
Gap Fade Positives:
1) following unfilled "up" gaps in most indices is a positive
2) fading down gaps on the day of the monthly jobs report, following down days, shows a good win rate and profit factor (though sample size is only about 15)
3) good profit opportunity relative to risk
Bottom Line: I am NOT fading today's gaps - as always these gaps could fill, but odds are stacked against it and this one would be much better played AFTER the opening bell.
Have a great 4th!
Scott
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