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2017issue C0633

Premarket gap permission with cup breakouts and one tight trail

The archive wrote the opening hour as a fixed sequence of screens and orders. A premarket-gap of less than 2 granted permission, a buy-stop waited for the premarket high to clear, later fills waited for shallow bullish-cup rims, and a 0.20 trail bounded every fill.

  • Names were limited to the 20–70 price band that showed a premarket-gap of less than 2, read on a two-day one-minute chart before the 9:30 a.m. Eastern cash open.
  • The first entry was a buy-stop above the premarket high, filled only after price cleared the upper edge of the gap's premarket range.
  • Later entries were taken only above small bullish-cup highs that continued higher, with cups shallower than 0.50 preferred.
  • An initial and trailing stop of 0.20 bounded every fill, could force several entries and exits in the first hour, and required standing aside when a breakout could not hold.
Entries in this reading3 entries
Current trackGap trading24 readingsBreakout system93 readingsTrailing stop122 readings

What the archive wrote down

The archive limited the procedure to names in the 20–70 price band that showed a premarket-gap of less than 2. Gap-trading treated that small premarket discontinuity versus the prior session high as the permission filter and first breakout trigger for a same-session long.

Premarket work used a two-day, one-minute candlestick chart so gap size, volume, trend, and any bullish-cup shapes could be read before the 9:30 a.m. Eastern cash open. A premarket-gap was an overnight or pre-open lift of less than 2 above the prior session high.

The first buy-stop

The first entry was a buy-stop, a resting order placed above the premarket high so the first fill occurred only after that resistance was cleared. A fill was allowed only after price also cleared the upper edge of the gap's premarket range.

Later bullish-cup highs

After that opening breakout, later entries were taken only above small bullish-cup highs that continued higher. A bullish-cup was a shallow rounded pullback, preferably less than 0.50 deep, whose rim was the next continuation-breakout trigger. Cups shallower than 0.50 were treated as the preferred continuation-breakout shapes.

The breakout-system rule was to take a fill only after price cleared a defined high, first the premarket gap range and later each cup rim that kept extending.

Liquidity and range screens

Liquidity and range screens required volume above 15,000 shares per minute and a prior-session high-to-low range of at least one point.

The shared 0.20 trail

Risk was bounded with an initial and trailing stop of 0.20. That trailing-stop was a fixed 0.20 initial and trailing exit that bounded every entry and forced standing aside when a breakout could not hold. The same distance could force several entries and exits in the first hour.

What the case chart showed

The case chart showed three sequential breakout fills: one above the opening gap and two above later bullish cups.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
18 of 20 in the Gap trading track
20187-7 pp.Next on Gap tradingInside-range gap breakout entry and stop rulesAn inside-range gap is an opening above the prior close that remains below the prior high, so the later long is located at that opening rather than chased through prior resistance.
All readings on this track · 20 readings
  1. 1988Constructing short-horizon gap and trailing-stop rules
  2. 1996Constructing closed rules for spikes, time stops and gap failures
  3. 1999Opening-gap same-day fade rules
  4. 1999Evaluating same-session opening-gap rules
  5. 1999Constructing mechanical gap-fade entry and exit rules
  6. 2000Constructing opening-gap continuation entry and exit rules
  7. 2000Gap types as trade hypotheses
  8. 2003One-day fade-the-gap rules remain unfinished across market climates
  9. 2003Gap and pivot entry rules with stops written before the fill
  10. 2007Evaluating gap and lap opens against short-horizon baselines
  11. 2007Evaluating same-day gap rules across price, momentum, and weekday
  12. 2011Session gaps as a fade-or-follow drill
  13. 2015Testing gap continuation breakouts as one procedure
  14. 2015Downside exhaustion gaps as a ten-session fade procedure
  15. 2016Constructing a gap-fill long as one entry and exit checklist
  16. 2016Gap-reversal entry and trailing-stop rules
  17. 2016Constructing late entries from serial uptrend gaps
  18. 2017Premarket gap permission with cup breakouts and one tight trail
  19. 2018Inside-range gap breakout entry and stop rules
  20. 2020Closing-range breakout after a downside gap
By fieldEntry and exit rules327 readingsBy year2017182 readings
All 24 readings tagged Gap trading
Also on Gap trading5 readings
2015Testing gap continuation breakouts as one procedure2016Constructing a gap-fill long as one entry and exit checklist2018Inside-range gap breakout entry and stop rules2020Closing-range breakout after a downside gap1988Constructing short-horizon gap and trailing-stop rules