Trading Exhaustion

GOOG j Daily L=469.95 -1.01

Exhaustion Gap

Short

Continuous Gap

MarT>6

Exhaustion Gap

Uptrend

Breakaway Gap

Uptrend

Breakaway Gap

IHjgg

460.00 j 440.00 : 420.00 i 400.00 j 380.00 i 360.00 j 340.00

Source: TradeStaticn

AprW

May "06

Trading Exhaustion Gap

The example above illustrates an "Exhaustion gap" setup from the Google's (GOOG) daily chart. A series of other Gaps are also shown in the example above. From April to May 2006, GOOG expanded making higher highs and traded from $340 to $450. In the middle of April 2006, GOOG released its earnings. Subsequently, GOOG gapped (exhaustion) open from $415 to $435 and traded as high as $450. After a few days from the earnings report release, GOOG failed to continue its higher closes and traded below the low of the gap bar at $435 to confirm an Exhaustion gap setup.

1. Enter a "short" trade below the low of the gap bar at $435.

2. Place a "stop" order above the high of the gap bar $451.

_3. Enter a target near the previous "swing low" prior to the exhaustion gap at $400.

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