Tuesday, August 25, 2015

Implications of Gap Up After 52 Week Volume High

I ran a scan today looking at times going back to 1995 when a 52 week high in volume was followed by a gap up of greater than 1%.

The peak positive return were 2 days and 6 days after the signal day, which in the current case was yesterday.

This is in line with previous stats showing that the max return tended to occur within about a week following the signal day of the big selloff type of day.

When I ran the scan for a 2% or greater gap up, there were 3 instances instead of 8.  The peak gains were also at days 2 and 6.

There were positive average returns from the close of the signal day for up to about 7 days.  After that they began to tip into negative average closing returns.

I also looked at time when the sum of the last 5 days gaps was more negative than -5%.
Similar comments apply with peak positive closing return at days 2 and 5 on average after the signal day.

So to sum up the expectation here, we may see/expect price to push up to fill the gap down at 198 on SPY within the next trading week (5-6 days).  At that point the scales would likely tip in favor of negative future returns and a probable retest of yesterday's low.

If/when we fill the gap, I will give further insight into how to speculate on the probable downside to come.

As of the time of this typing, it seems the easy money was made between yesterday's open and today's gap up open.

Without seeing further upside from here I personally am not ready to speculate on the downside.  I don't know if this bounce will be able to muster the strength to get back up to the 198 level, but that is what the best comparisons suggest has consistently happened over the week following the washout like happened yesterday.


1 comment:

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