Technical Analysis of Gaps: Identifying Profitable Gaps for Trading
Product Author Bios
Julie R. Dahlquist, Ph.D., CMT (San Antonio, TX) is Senior Lecturer, Department of Finance, at the U. of Texas at San Antonio College of Business. With Charles Kirkpatrick, she co-authored Technical Analysis: The Complete Resource for Financial Market Technicians.
Richard J. Bauer, Jr., Ph.D., CFA, CMT (San Antonio, TX), Prof. of Finance at St. Mary's Univ.'s Bill Greehey School of Business, wrote Genetic Algorithms and Investment Strategies. Dahlquist and Bauer won the 2011 Charles H. Dow Award for excellence and creativity in technical analysis, and co-wrote Technical Market Indicators.
Gaps have attracted the attention of market technicians from the earliest days of charting. They’re not merely conspicuous: they represent price jumps that could signal profitable trading opportunities. Until now, however, "folklore" about gap trading has been common, and tested, research-based knowledge virtually nonexistent. In Technical Analysis of Gaps, renowned technical analysis researchers Julie Dahlquist and Richard Bauer change all that. Drawing on 60 years of comprehensive data, they demonstrate how to sort "strategic" gaps from trivial ones, and successfully trade on gaps identified as significant. Building on work that recently earned them the Market Technicians Association’s 2011 Charles H. Dow Award for creativity and innovation in technical analysis, Dahlquist and Bauer offer specific gap-related trading tips for stocks, futures, and options. They consider a wide variety of market conditions, including gap size, volume and previous price movement, illuminating their findings with easy-to-understand diagrams. Coverage includes: understanding what gaps are and how they arise; recognizing windows on candlestick charts; identifying gaps with superior profit potential; combining gaps with other technical techniques for a more complete and effective analysis; and putting it all together with real trading strategies. For stock, commodity, and currency traders in the U.S. and worldwide, and for active individual investors seeking new ways to maximize returns.
10 of 10 people found the following review helpful
Handy and helpful,
This review is from: Technical Analysis of Gaps: Identifying Profitable Gaps for Trading (Hardcover)Opinion: A Handy and Helpful Guide Book
by Hank Pruden, Ph.d.
I have a favorable opinion of this book. The topic of "gaps" in stock prices that the authors discuss is important now and I believe will become even more important to technical analysts and traders in the future.
The price gaps defined, discussed and documented in this compact and handy book will serve as a ready and reliable reference. Many cases of gaps are listed, summarized and scrutinized for points of departure. The incidences of gaps mounting in recent years revealed in this book underscore the fact that gap analysis is becoming a key subject in technical analysis.
This book will help the technician and trader by furnishing a pivotal tool for coping with a market world increasingly composed of fat tails, Black Swans, and Catastrophe Jumps that give rise to non-linear discontinuities. The cases of CLWR on page 95 and PANL on page 100 in the Dahlguist and Bauer book nicely... Read more
8 of 9 people found the following review helpful
Interesting gap study,
This review is from: Technical Analysis of Gaps: Identifying Profitable Gaps for Trading (Hardcover)
Customer review from the Amazon Vine™ Program (What's this?)This book was very needed with the unprecedented recent gaps in 2011. The authors go about studying how stocks performed after gap ups and gap downs and how they played out over the next 5, 10, and 30 days. The results are not surprising because they looked at the stock market as a whole and not specific stocks in the value or growth sector. Their findings? Gap ups tend to retrace in the next few days but end up going higher over the next month. Gap downs tend to go down over the next few days but also end up higher over the next month. These findings show that gap ups are bullish for stocks over the longer run and gap downs are usually over done and will revert back closer to the mean price once the fear has subsided.
However this is the case with the vast majority of stocks, there are outliers in growth stocks that gap and run 50% to 100% in price or gap down then tumble 50% in price over a month. I believe a study of growth names would have given different results than a... Read more
5 of 5 people found the following review helpful
Good, intermediate level book on gaps,
This review is from: Technical Analysis of Gaps: Identifying Profitable Gaps for Trading (Hardcover)This is a good, intermediate level book on gaps. The authors cover the various types of gaps, their frequency and measurement. They also relate gaps to other aspects of technical analysis, such as previous price movement, volume and moving averages.
There are a fair number of charts, mostly candlestick. There are also spreadsheet style tables showing returns of gaps over various market conditions and after different lengths of time.
The last chapter is called "Putting It All Together" and includes a wrap up discussion.
I would like to have seen a trading system with a Tradestation style performance summary.
Ms. Dahlquist and Mr. Bauer are both Chartered Market Technicians with previous books to their credit. I recommend this book for those looking to learn more about gaps.
› See all 23 customer reviews...
Online Sample Chapter
Table of Contents
About the Authors xii
Chapter 1 What Are Gaps? 1
Chapter 2 Windows on Candlestick Charts 17
Chapter 3 The Occurrence of Gaps 43
Chapter 4 How to Measure Returns 71
Chapter 5 Gaps and Previous Price Movement 107
Chapter 6 Gaps and Volume 121
Chapter 7 Relative Price of Gap Occurrence 139
Chapter 8 Gaps and the Market 159
Chapter 9 Closing the Gap 205
Chapter 10 Putting It All Together 219
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