I looked at 3631 trading days going back to 11/17/93. Of those there were 368 mid-sized gaps down in uptrends and 222 mid-sized gaps down in downtrends.
Buying at the open and selling at the close when the market was in an uptrend would have resulted in 177(48%) winners and in total gained 8.5% over the 368 trades. On a per-trade basis that’s 0.02% - basically break even. Of those gaps down 213 (57%) filled at some point during the day. (A fill in this case is defined as a move back up to the previous day’s close.)
Buying at the open and selling at the close when the market was in a downtrend would have been profitable 98 (44%) times and LOST you almost 32% over 222 trades. Per trade that’s about a 0.14% loss on average from open to close. Of those mid-sized gaps down, 152 (68.5%) filled at some point during the day.
I previously showed that large gaps down in downtrends typically represented an intraday buying opportunity as they had a large positive expectancy. Mid-sized gaps do not act the same at all. They contain a negative expectancy. Interestingly, although a good percentage of them fill, they also generally fail. Fading the open could be one play. Another could be looking for a short entry after the gap fills.
As I said last week, make sure you take the following two things into account when deciding how to approach a gap opening: 1) Long-term trend of the market. 2) The size of the gap. They both matter.
Edit note: SPY was used for the above test.