Thursday, January 20, 2011

Unfilled Gaps from Highs

Wednesday was the first significant day of selling in a while.  The gap down in the SPY never filled and the market dropped for most of the day.  Below is a study that examines SPY perfromance following other instances of unfilled gaps down from a 50-day high.

These unfilled gaps from high levels often lead to more selling over the next few days.  The edge isn't huge, but it appears worthy of consideration.


Graeme said...

Hi Rob,

How are you determining an "unfilled gap" here?

Obviously you weren't looking for an absolute gap outside of the prior day's range, so I can only gather that you were looking at the open compared with the prior close. But if that's the case what makes it unfilled? My data shows the SPY high @ 129.54 compared with the prior day's close @ 129.52, so the opening gap from the prior day's close would have been filled during the day????

What am I missing here?

Rob Hanna said...

Hi Graeme,

I used Tradestation for the study. They show $129.50 as the high - just below the previous day's close.


Graeme said...

thanks for the clarification Rob!