Technical Analysis and Fundamental Analysis (4): Does the gap have to be filled?

The gap will usually be filled, but the initial gap is not necessarily, and the exhaustion gap may not be filled for a long time. The deep component index is quite special, and its gap has its magical effect.

There is a “common saying” in technical analysis that goes well: the gap must be filled. Compared with most technical analysis techniques, this common saying is more accurate and simpler. Gap is a commonly used term in the stock market. We use the concept of Baidu Encyclopedia. A gap generally refers to a period of rapid and large stock price changes without any transactions. It shows a vacuum area on the stock price trend chart. This area is called “gap”. It is also commonly called a gap.

The saying that the gap must be filled is not necessarily accurate when applied to individual stocks, because many big bull stocks have a gap at the beginning of the big market, and have not covered it since then, or at least it has been a long time and have not covered it. , For example, COSCO Shipping Holdings, which will make a big splash in 2021.

As can be seen from the above figure, after COSCO SHIPPING Holdings rose from 2020, although there was a big correction in more than two years, it never made up for the initial gap at the beginning of the big rise. This situation is not uncommon in many individual stock trends.

Generally speaking, the market index is not easy to be manipulated and can best represent the real situation. In the early days of the establishment of the Shanghai Composite Index and the Shenzhen Component Index in 1990 and 1991, the two exchanges had many gaps, and they did not cover them. But at that time, it was considered a special period and lacked reference value, so we will not count it here.

There was a gap in the Shanghai Composite Index from July 29 (Friday) to August 1, 1994, and it has not been filled so far; from July 21 to 22, 2005, there was also a gap that has not been filled; From November 7th (Friday) to 10th, 2008, from January 4th (Friday) to 7th, and from 8th to 9th, 2019, there were gaps, and they have not been filled so far.

The Shanghai and Shenzhen 300 Index had a gap between November 7 and 10, 2008; there was a gap between January 4 and 7, and between January 8 and 9 in 2014, and these five also Both are initial gaps that have not been filled so far.

The above situation shows that the initial gap for the big bottom to break through upwards may not necessarily be filled. Interestingly, the Shenzhen Component Index also had a gap on the above-mentioned dates, but except for the gap from January 4 (Friday) to 7, 2019, it was filled later. Some of them were made up after many years. Shen Chengzhi’s habit of “making up even though it is far away” is really admirable. However, both the Shanghai Composite Index and the Shanghai and Shenzhen 300 have initial gaps, “I would rather die than make up.” This seems to indicate that the long-term trend of the large-cap stock portfolio is more stable, while the small- and medium-cap stock portfolio is more likely to skyrocket.

Generally speaking, the lowest point of the bear market is especially the double bottom pattern, and the gap is prone to appear on the right side, and it is often not filled. But if it goes up all the way, it’s not a big bull market, it’s just a strong rebound. Usually, you have to continue to trade back and forth to make a complicated bottom. When you break through upwards, it is also prone to gaps. It is generally difficult for a stock index composed of large-cap stocks such as the Shanghai Composite Index and the Shanghai and Shenzhen 300 to cover, while the Shenzhen Component Index, Small and medium-cap stocks such as the small and medium-sized board and the ChiNext may recover after a few years. If they recover in the short term, it means that the bottom is still grinding.

In the current situation, several major indexes have just filled in the two upward gaps on November 28-29 and December 26-27, 2022. As can be seen from the figure above, the stock market has repeatedly experienced downward and upward gaps recently, and since November 2022, the bottom has gradually increased, which is a very typical bottom-building pattern. Of course, the breakthrough cannot be determined just by the gap, and other indicators are needed to cooperate. (Fortune Chinese website)

Note: This article only represents the opinion of the author and does not represent the position of Fortune Chinese.com. Article content is for reference only and does not constitute investment advice.