Pattern Gap

Pattern gap is a formation that is created in a bottom pivot or a top pivot.

A pattern gap in a bottom pivot means:
1. that today's closing price is in the upper 50% of the bar
2. that today's closing price is higher than the previous day highest stock price and that today's closing price is higher than the previous two days closing prices
3. that the lowest price during the day is higher than the previous day's closing price

A pattern gap in a top pivot means:
1. that today's closing price is in the lower 50% of the bar
2. that today's closing price is lower than the previous days lowest stock price and that today's closing price is lower than the two previous days closing prices
3. that the highest price during the day is less than the previous day's closing price

A stop-loss for the pattern gap signal is placed on the previous bars lowest value at a buy signal and on the previous bars highest value at a sell signal. A buy signal for pattern gap in a bottom pivot is given the next day if the top level of the pattern gap bar is passed. A sell signal for pattern gap in a top pivot is given the next day if the lowest level of the pattern gap bar is passed. When you act on pattern gap signals, decisions are always taken in the direction of the trend. Pattern gap signals are triggered in recoils of the dominant trend.