Category:BGD
Big Gap Down, should be looked as a big BRBCL, i.e. a strong bear BO. 80% chance of at least one reversal[1] in the first hour. The bears want a double top or wedge top on a pullback to near the EMA. The bulls want a double bottom or wedge bottom for an early low of the day. When there is a BGD, odds favor bears:
- 80%: 85% chance of PB in first 2 hours. 80% chance of at least one reversal attempt in the first hour. (i.e. some kind of TR on the open).
- 70%: 75% chance trending TR day. 70% chance swing down after 1pm ET.
- 60%: 65% chance the gap will not close today. 60% chance of swing down in 1st hour.
- if instead it is going up, often pulls back 50% in wedge bull channel.
Worth to mention, if the gap down is overly big, i.e. a HGD, it increases chance of TRO that lasts a couple hours since it might take that long to get near EMA[2]. Generally, a big gap is a gap that is around the half of the daily range, a huge gap is a gap that is bigger than the daily range.
