Please explain Breakaway Gap Up

PeterPan8

Can someone explain all details of the Predefined Breakaway Gap Up:

and [yesterdays min(5,low) > yesterdays max(5,high) * 0.95]
and [low > yesterdays high * 1.026]

What could be modified to make it more interesting for a swing trader?

markd

https://chartschool.stockcharts.com/table-of-contents/overview/technical-analysis-101/ta-101-part-15

This link might help.

It seems the first line in your quoted code is meant to capture price recovering from an "extended" decline.

The second line is meant to capture a "real" breakaway, versus a gap that might be more common for stocks that are traded overnight, that might represent just a continuation of a smaller move.

It's interesting to a swing trader because the breakaway gap is supposed to represent a real change of attitude toward the stock (that's what the big volume should represent), so a significant up leg should follow.

The breakaway bar should be accompanied by much higher volume. I'm surprised that's not included here. You could run the pre-defined scan against past dates and look for a good volume level to separate the better follow up legs. Maybe something like

and [volume > sma(20, volume) * 1.5]

or maybe * 3, * 4, * 5. Some research should point you toward a good number.

You could also look at price versus its at least mid-length MA, and the MA itself. Again your chart research will tell you. You could look for price above its mid length MA, where the MA has been falling. So maybe

and [close > sma(50, close)]
and [sma(50, close) < 100 days ago sma(50,close)]

You'll probably want to play with the 100 day parameter.

PeterPan8

Thanks markd, good points and lots of tests to do!