Gap Reversed

When the market gaps lower, trades at a new recent low and then closes up on the day, most people tend to perceive the action as bullish. A rally could form off such a bar, but I have not found it reliable under such a description.

I thought a visual might be more interesting than a statistics table tonight. Below is a chart of the 2002 summer selloff. All bars with a gap lower, a 20-day low, and a close higher have arrows pointing at them. The 2 large pink arrows represent the 2 times the gap down was greater than 1% as happened today.

Simple Gap Reversals as seen above are not necessarily bullish. On the other hand, simple Gap Reversibles as seen below are quite fetching.