Mind the Gap! 17th Sep 2022
🖼 Daily Technical Picture 📈
📉 GAPs are unfashionable and it tends to get closed. I’m not talking about the retail clothing store.
➤ A large price gap is caused when there is a substantial difference between the closing price on the previous trading day and the opening price on the following day. This occurs in markets that don't trade around the clock like stocks. A lot of things happen in between!
➤ Let's look at
SPY, S&P500 equity index ETF (it went ex-dividend). We experienced such a big gap on Friday open. The gap is partially closed but early Monday trade has widened it again.
➤ Most gaps will get filled in time, or at least with a good attempt. There are a few gaps in recent times highlighted in yellow. The latter two not filled. With the VIX initially spiking and coming back down Friday, I suspect the gap shall be closed. We will need to see if by closing this gap prices can get back above the support level and beyond.
➤ The overall price structure is in a downtrend. Price has formed a lower high and now a lower low. I don't rely on these classical patterns for trading but many do, so it is good to keep an eye on it.
➤ I mentioned that SPY went ex-dividend on Friday. This meant people who held the ETF as at end of trading day will receive the dividend payment at a later date. This didn't help the price. Typically, the price shall drop by the amount of the dividend (all else being equal). An interesting side-note is that the 17th Jun bottom occured on the previous ex-dividend date too. I hope we get a repeat!
➤ I took profits on my European short positions. The overall exposure increased to +120%. A moderate level of conviction at a portfolio level but maximum conviction on a single index level (at 40% exposure). The maximum portfolio exposure is +/- 200% on capital, the level of highest conviction.
➤ Conclusion: I'm still looking for a bounce and a closure of the gap in the short-term. A failure to get above the previous support would give Bears more ammunition.
📉 GAPs are unfashionable and it tends to get closed. I’m not talking about the retail clothing store.
➤ A large price gap is caused when there is a substantial difference between the closing price on the previous trading day and the opening price on the following day. This occurs in markets that don't trade around the clock like stocks. A lot of things happen in between!
➤ Let's look at
SPY, S&P500 equity index ETF (it went ex-dividend). We experienced such a big gap on Friday open. The gap is partially closed but early Monday trade has widened it again.➤ Most gaps will get filled in time, or at least with a good attempt. There are a few gaps in recent times highlighted in yellow. The latter two not filled. With the VIX initially spiking and coming back down Friday, I suspect the gap shall be closed. We will need to see if by closing this gap prices can get back above the support level and beyond.
➤ The overall price structure is in a downtrend. Price has formed a lower high and now a lower low. I don't rely on these classical patterns for trading but many do, so it is good to keep an eye on it.
➤ I mentioned that SPY went ex-dividend on Friday. This meant people who held the ETF as at end of trading day will receive the dividend payment at a later date. This didn't help the price. Typically, the price shall drop by the amount of the dividend (all else being equal). An interesting side-note is that the 17th Jun bottom occured on the previous ex-dividend date too. I hope we get a repeat!
➤ I took profits on my European short positions. The overall exposure increased to +120%. A moderate level of conviction at a portfolio level but maximum conviction on a single index level (at 40% exposure). The maximum portfolio exposure is +/- 200% on capital, the level of highest conviction.
➤ Conclusion: I'm still looking for a bounce and a closure of the gap in the short-term. A failure to get above the previous support would give Bears more ammunition.
🏆 eToro Popular Investor 💰
✅ Copy My Trades @ eToro, etoro.com/people/mrstocky
✅ Verified Track Record 📈
Not Investment Advice
✅ Copy My Trades @ eToro, etoro.com/people/mrstocky
✅ Verified Track Record 📈
Not Investment Advice
Feragatname
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