Gap Proximity to Resistance or Support
Most price signals contain the strongest predictive value when they occur at or close to resistance or support. This proximity factor is the strongest factor in determining the reliability of the signal itself. This is especially true in the case of breakaway and exhaustion gaps.
When price gaps through resistance or support, a reversal is most likely. The tendency for gaps to fill should not be overlooked in any case, but when the gap takes price over the trading range border, it has extra meaning. A breakaway gap, if confirmed by a strong signal indicating continuation, is strongest when it breaks through. However, if a reversal signal or set of signals occurs immediately, then expect price to retreat ...
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