Learnings about GAP up or GAP down

Just a 20 EMA mean reversion concept. Any trying to spot trading oppurtunities. If there is a GAP UP or GAP down in any kind of stock
just observe it using 5 minute charts and wait for the formation of minimum three candles i.e 15 minutes.

And if there is still huge Bandwidth GAP difference between the 20 EMA
and the spot price(atleast more than 4%) then more chances that the sentiment could vanish and and the stock or indices could move towards the EMA band. It may touch the EMA line either by moving sideways or trend reversal. Sample 3i-infotech charts are shown here for your reference.

You can place the stop loss order above the thrid candle high if you are going to short after 15 minutes of GAP UP or at the third candle’s close if you are going to long after 15 minutes of GAP Down.

And finally close the trade once it got mean reverted to the EMA bands.
i.e the gravitational rope

Chart 1

[wp_ad_camp_5]

 
Chart 2

Chart 3

Stop Loss Hits in this Third Case which is your 3rd candle high

Chart 4

Chart 5