Have you ever left a place in a hurry just to find out you forgot something? Odds are you’ll go back and get it.
About five months ago the Nasdaq-100 left its near 12-year high ‘in a hurry’ and forgot something on top. It forgot to close a couple of chart gaps.
What is a chart gap and why is this significant?
Chart gaps are breaks between prices on a chart. They occur when a stock/index makes a sharp move up or down with no trading occurring in between bars or candles (see chart).
Some gaps are big, others are small, but all of them reflect unfinished business. Imagine paving a brick driveway. The pattern isn’t complete until all bricks are in place.
I’ve been watching chart gaps for the S&P 500 and Nasdaq-100 since 2010 and found that both indexes have come back every time to close open chart gaps. The 2010, 2011, and 2012 declines all left open chart gaps … and all of them got filled.
As expected, the Nasdaq-100 (QQQ) filled its last big chart gap at 2,806 on Wednesday. The January 2, Profit Radar Report stated that: “The Nasdaq-100 still has an open chart gap at 2,806 and a tiny gap at 2,860. At least the gap at 2,806 and perhaps the gap at 2,860 should act as magnets.”
The gap at 2,860 is only one point deep and barely visible on the daily chart. As long as price remains above 2,750 we shouldn't assume this gap is too small to require filling.
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