We have two types of gaps when we are watching a graph, which are gap up and gap down, so what are they? Gap up means that the lowest price today is even higher than the highest point yesterday. For example, the lowest price today is RM1, but the highest price for yesterday is RM0.95.
Gap down is the complete opposite, where the highest point today is even lower than the lowest price for yesterday. For instance, today highest is RM1, but the lowest price for yesterday was RM1.05.
So after the price between two days has a gap, it will only most likely form a window. The window will act as your resistance or support area. We normally only use support or resistance line, but window is a more powerful version of those, as it is an area.
The examples given are SOLUTN and MASTER, these two stocks has some window that we can refer as support and resistance. We can see from SOLUTN that their gap up happened back in August 21st, where the MOU between them and Cansino was announced. Hence, it creates a big window, and act as a strong support in the future. As we can see on September 10th that the price dropped into the window, but rebound very quickly in the next days, and since then never dropped to that price range.
On the other hand, we can see from MASTER’s graph that they have a gap up in November 2019, and a gap down at February 2020. The gap up is due to a good quarter result, where the gap down is due to the bear market occurring on early March, alongside with its poor quarter result. As we can see in the early 2020, that the price will rebound quickly if it touched the window boundary. However, when there is a gap down, it absolutely erased the previous window, and form a new downtrend window, that MASTER has yet to break since.
In short, if a stock has gaps and are able to form a window, it is quite a good indicator to use, in order to determine the resistance and the support of the stock.
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