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A few days ago someone asked about gaps in stock charts. I don't remember what thread it was in so am posting this here.

A good example of "filling the gap" can be seen in the daily chart of TQQQ. If you look at the chart, it gapped up on the 12th of this month when it made a low of 146.86 after a high the previous day at 141.39. It went as high as 158.33 on the 13th then turned around and went down, to today's low of 141.94. It did not get down to precisely 141.39 but close. That is filling the gap, or closing the window in candlestick charting.

This happens more often than not, although not always so quickly. Sometimes it takes weeks, sometimes it does not happen at all, but quite often a gap acts like a magnet to the price with the bottom of the gap providing strong support.
 

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Gaps can be used to help identify wave counts i.e., wave 3

When buying 5 up & 3 down or selling 5 down & 3 up often gaps can be used with fib retracement levels & wave lengths i.e., If price fills a gap @ .382 retrace in 4th wave or .618 retrace in a second wave the odds increase for a market turn. If wave a = wave c in an abc correction or c is a fib ratio of & a gap is filled the greater the odds of a market turn with 5 waves occurring in the opposite direction.
 
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