Session gaps as a fade-or-follow drill

What a session-gap is

A session-gap is a material difference between one session's closing print and the next session's opening print. It is labeled higher or lower by the direction of that open.

Gap-analysis reads that vacancy on an OHLC chart as a discrete structure. Direction, size, and later retracement can be marked on the chart and later judged true or false.

Where a vacancy can still print

Large weekday futures gaps have become less frequent because most contracts now trade nearly around the clock. Little unquoted time remains between sessions.

Gaps remain possible after short scheduled halts. One window is the roughly 15-minute pause between a stock-index futures close at 3:15 Central time and the 3:30 reopen during earnings announcements. Gaps also remain possible after the Friday-to-Sunday weekend close. A weekend-reopen is a Sunday afternoon or evening open that can print well away from Friday's close after that multi-day halt.

What counts as a gap-fill

A gap is treated as filled when later trade retraces to the prior session's closing price. That pre-gap level is the gap-fill.

Fill timing is not a single horizon. A gap may retrace immediately or within days, or the process may extend across weeks or months.

Fade toward the close or wait for it

After a gap, two rule-based postures can be written in advance. One fades toward a fill. The other waits for the fill and then positions in the original gap direction as continuation.

Gap-trading is the procedure that converts the vacancy into entry, exit, and stand-aside rules. The written choice is typically to fade toward the prior close, or to wait for that close to be revisited.

Breakout uses a completed fill, or failure of a fade at the prior close, as confirmation that trade may continue in the original gap direction. Editorial reading: the confirmation is the later print at that level, not the opening vacancy itself.

A weekend-reopen that traded through the close

In early October 2010, March corn gapped 45 cents higher to 5.82½ on the Sunday evening open after a Friday grain report, from a prior close of 5.37½. The open was a weekend-reopen.

In that episode the later decline traded through 5.37½ to a low of 5.22 before the advance resumed. The prior close functioned as an approximate zone rather than an exact turning tick.

Editorial reading: the printed level is a zone, not a tick magnet. A crowded exact fill price is the condition most likely to be traded through. That last sentence is a TradersWeek interpretation of the workflow, not part of the historical description.