This is a report from the Tradesight Educational archives. While the slides are from a few months ago, the point is a lesson that all should learn:
Market Support Even on Gap and Go Days
For those that are new, let me quickly redefine a “gap and go” day. It’s when the market gaps up and keeps heading higher or gaps down and keeps heading lower (and I don’t just mean a couple of point gap).
A “gap and fill” is when the market gaps up and then pulls back and fills the gap or gaps down and heads up and fills the gap.
80% of gaps on all assets (stocks, futures, forex) fill the same day. But that doesn’t mean it is always as easy as “gap up, expect to head down.” Remember that you can gap up, head higher, and then come back later and fill. The reality, though, is that the bigger the gap, the less likely it fills, which means the more likely that you get a “Gap and Go” day.
The reason that I hate Gap and Go days is because they tend to ruin the picks off of the report. If you have a gap up, there’s a good chance that long ideas gap over their daily chart triggers. It also means that stock will gap out of the range of the prior day or so, which makes spotting patterns for intraday trades tough. It also means that the short ideas are not going to come into play, as they gap up too.
So I tend to groan when I see a big gap up, especially if we head higher shortly after. It just means that I don’t expect to find much that day.
But the point of this report is that it doesn’t have to 100% MEAN that we won’t find something. Standard rules apply. Follow market direction and find trades in that direction. Don’t assume a gap fill if it isn’t happening. Don’t assume more movement in the “go” direction if it isn’t happening. Let the futures guide you.
So after the Holiday weekend, we gapped up Tuesday, and after about the first 10-15 minutes of drifting and everyone looking at each other wondering what to do, we headed higher. It was a big gap up, the perfect candidate for a “gap and go” day. Looked like this:

A few interesting points.
1) We did go quite a bit higher after the gap.
2) We still filled the gap later in the day (80% rule).
3) There were clean triggers that were supported by the market OFF OF THE REPORT (top picks).
“Gap and go” doesn’t mean ignore them. It just means that usually they don’t come into play. But when the do, nothing changes.
The ES was heading up and NTES, which we had been following for a few days for a daily chart breakout on the report, came up early and tested (but did not break) the trigger. It didn’t gap over. And market direction was still green when it triggered finally, and it worked great:

Meanwhile, later in the day, as the market did break lower and headed down to fill the gap, with direction clearly red, VSEA triggered short (top short idea off of the report). It gave a good $0.40 move, which is plenty to make some money:

Point is, I don’t like Gap and Go days, but the rules don’t change. If things align the way we like, we have trades. If not, they don’t.