Gaps... do they exert some kind of inexorable force that requires them to fill? No. Gaps often DO fill, but there is absolutely no logic or reason behind the idea that they MUST fill.
OK, you buy 100 shares of Amalgamated Hogwash (AH) at 80 bucks a share. You wake up the next day and learn that the CEO, CFO and COO were all arrested because they were found to have been cooking the books and also falsifying the results of their pig cleaning products. In fact, they didn't even have a business license and their sole asset was a 1979 Plymouth Volare Station Wagon and a set of hand trucks.
You wake up to that news and your shares gap down to .0037 cents.
OK gap fillers. Are you going to BUY with the expectation that AH will eventually fill the gap and hit 79.99 before it becomes a short again? I don't think so.
The fact is, most gaps get filled, but they do not fill at a statistically significant number when compared to a NON-gap move. Consider also these things:
What about gaps that happen intraday? They do not even show up on charts AS gaps.
So, people are seeing gaps in ARNA and thinking they HAVE to fill. Not so. If you can give me a REASON why they HAVE to fill then I will listen to it, but gaps are just like any other place on the chart, gap or not. BTW, there is a gap in the chart of the Nasdaq in the mid 50's. AAPL has gaps all over the place that may fill at whatever point AAPL goes back to 27. BTW 27 is a gap on AAPL's WEEKLY chart.
There is one thing that is quite true about gaps though, when they DO fill they tend to provide support or resistance depending upon whether they are above or below.
sp500, thank you very much for taking your time and sharing you ideas and knowledge with the board. I do not always comment but I do read your posts, great videos btw. I am new to the stock market and I am constantly trying to learn as much as possible. Its posts like yours that keep me reading this board. Please ignore people like Red and keep up the good work.