Gap play with a twist

Ok, so before I get down to the trade of the day I want to run through a trade I was in that I got lucky with, simple as that.:D

We had a gap down on Friday as you know and the market made a pretty feeble effort to push upwards. Giving the classic heavy gap pattern. Anyway, dips are being bought at the moment so I’m being a bit cautious on the short side until the market gives me the green light again. That means the sell the push up on a gap down day play’s out for me. Instead I’m looking for support levels to nibble long at.

10305 is a good level from several days back and one I’ve left on my chart just for days like today where we might see a kiss:

The market came down, found a bit of support, with a TICK divergence, well worth a shot on the long side.
I knew data was due out at 14:45 London time, but five minutes was enough time to get the pop, sell the position and let the data do it’s thing.
Well the data came out early!!
Luckily for me the market popped from that and not wanting to look a gift horse in the mouth I took my 50pts and thanked the market.

Lesson……don’t always assume the data will be released on time :rolleyes:

Anyhow, that fluke aside the market action post data set up a nice little bullish long play with a decent extended target………….the gap fill.
The theory behind it is basically the market liked the data, we’ve seen the strength and so now we look to see where our targets are. The obvious one is the gap fill.
Where would our stops be? Under the low of the day
Now we need to see a trigger. That’s where your tape reading comes into play.

The market started pulling back slowly after the pop and actually went a lot further than I would expect, but that doesn’t matter, as long as it doesn’t start testing lows you’re still waiting for that long trigger.

As soon as I saw that decent green candle start to form on good volume I took my long. First stop was the previous high, I always take some off the table here, bank some profit, reduce my risk.
But if the read was correct the market should push through this without too much grief and give us our final gap fill target.

(I don’t mind seeing some consolidation at the highs as long as it doesn’t push down too low)

After 5 minutes of flag action the market pushed higher and almost tagged the gap……almost. I’m always alert to this sort of thing and will often tape read to scale out rather than wait for the exact gap fill. But I still was holding a decent size position and was really looking to scale out into any buy stops above the gap.

The market pulled back for quite some time and I was ready to take profits on the last batch but decided to wait and see if that prior resistance, now support would hold. It did hold and it looked like we could get a “bonus setup” ie one where you can add a bit of size to your core position, to try and milk the last few drops of the move.
(Stop placement was obviously just below that support level)

We got the pop, gap fill and final push pinging all the buy stops. I closed the final batch into the stops, done for the day. :cool: