I discussed the standard opening range breakout in my last post. Now I want to talk about a variation of the Opening Range Breakout . It’s called the Opening Gap Reversal. It’s just another of the many useful setups for day trading online that you can add to your arsenal.
The chart above shows the opening range reversal that occurred when First Solar (FSLR) failed to fill its gap today. The standard mantra of traders is that gaps fill more often than not. I don’t know how true that is, but I do know lots of people believe that it’s true.
What happens when the market proves a lot of people wrong? You get a range breakout. The idea of the Opening Gap Reversal is that a lot of people who had anticipated closing the gap are getting out of that trade. There are also those of us who are there to take advantage of that, which adds to the momentum of this variation of the opening range breakout.
The entry for this trade occurs on the breakout from the morning range. You can see in the First Solar (FSLR) online stock chart, that the price reached a high of 137.44 before attempting to close its gap. FSLR was about half a point away from closing its gap before it took off. You can see how the volume ramped up as it approached and broke that morning high at 137.44.
After the breakout, FSLR ran up a point and a half before taking a breather. Then it decided to run another 6+ points (after nearly falling back into the morning range). It would have been rather lucky for anyone to catch all the available movement on this one, but there were plenty of profit taking opportunities.
As I said above, the Opening Gap Reversal is a type of Opening Range Breakout. For more tips on how to play the Opening Range Breakout, check out “3 Factors for Opening Range Breakout Success.“