Most public thinks that once a stock reached a gap down area, it's a sure sell. Well, I will say that this is only 20% true. Of course that's my opinion and it might not apply to you. I label myself as a market psychologist for a reason. That's because I know how most public think and more importantly how the BBs operate. To say that a gap down area is selling is pretty general and delusional. There are only certain conditions when a stock reached a gap area would then it encounter selling to bring the price lower. However, there are some gaps which prelude real buying.
Look at Capitaland and TT Int, it had reached the gap area, however there were no signs of selling at all. So if you have shorted there, by now, you would have cut losses. Most public would have shorted there because to them, they saw a gap which indicates selling. Look at STI, it gap down on June 4th and I made a call not to short it and today we witnessed a huge rally thereafter. However again, for most public, a gap down is gloomy and they look to sell.
http://stockmarketmindgames.blogspot.com/2012/06/sti-anyone-shorted.html
http://stockmarketmindgames.blogspot.com/2012/06/downfall-of-ronald-k.html
My prognosis for gap is simple. There are no hard facts or rules. Look for a deluge of selling/buying when it reaches a gap area. One must be very observant, pay fine close attention to mini details and focus with concentration. Ask yourself many questions during your thought process and when you see a swarm of buying, just buy with the flow and vice versa. That's how I did it at least.
Ronald K - Market Psychologist - The Big Speculator
