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Ken Calhoun's article, “Trading Gap Reversals”, presented a strategy to take advantage of large gap downs. The system was designed to be run on intraday data so it will not work on the Daily Chart version of MetaStock. Below are the formulas for an exploration to find these trading opportunities. This should be run shortly after the market opens. It will require data from the two prior days for the calculations to work correctly so it is recommended to use either 5 or 10 minute data. Be sure to set the exploration to load at least 250 records. The formulas for are:
Exploration formulas: Column A
Column Name: Close
formula:
Column B
Column Name: Open
formula:
Code:{Open of the current day}
new:= ROC(DayOfWeek(),1,$)<>0;
ValueWhen(1, new, O )
Column C
Column Name: Prev C
formula:
Code:{Close of the previous day}
new:= ROC(DayOfWeek(),1,$)<>0;
ValueWhen(1, new, Ref(C, -1) )
Column D
Column Name: range
formula:
Code:{High - Low range of previous day}
new:= ROC(DayOfWeek(),1,$)<>0;
HighestSince(1, new, H)-LowestSince(1, new, L)
Column E
Column Name: target
formula:
Code:{target entry price}
new:= ROC(DayOfWeek(),1,$)<>0;
ValueWhen(1, new, O + 0.50 )
Filter formula:
Code:new:= ROC(DayOfWeek(),1,$)<>0;
r:= HighestSince(1, new, H)-LowestSince(1, new, L);
C >= 20 AND C <= 70 AND ValueWhen(1, new, Ref(r >= 1, -1)) AND ValueWhen(1, new, (Ref(C, -1) - O) > (Ref(C, -1)/10))
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