Bull or Bear Market… Doesn’t matter

Kyle Dennis’ new, 5 Min Strategy is poised to double Your Money Weekly!

Michael S. made 173% with Dollar Ace. So can you!


Trader toolkit: Trading the gap in healthcare stocks

Kyle DennisKyle Dennis ·

Ever look at a stock chart and see missing candle bars between days, or even intraday? Those are gaps.

Gaps are due to a catalyst or news event, and halts trading while it is happening. It typically occurs premarket or during the after hours, but intraday gaps happen too.

Gaps are key regions that chartists like to look at for potential trades. With that in mind, let’s look at an example of how to potentially trade a gap using basic support and resistance lines, and key levels.

When a stock gaps up, that means it opened higher than it closed in the prior period; the opposite is true for gap downs.

For an example, look at this daily chart on Amphastar Pharmaceuticals Inc. (AMPH).

Source: TradingView

As noted here, the stock had two gaps down, each attributed to catalyst events. You could, therefore, potentially use these areas for trading; if a stock “fills” the gap, that means its price rises back to the level it maintained prior to the gap.

Thus, you could have potentially looked to buy and hold AMPH to play for a gap fill. Let’s assume you noticed the gap downs and saw how beaten up AMPH was, so you looked for a mean-reversion trade. Assume you got long the stock around $12.50 area.

Here’s a look at how that buy-and-hold swing trade would have worked out.

Source: TradingView

With biotech stocks, gap ups and gap downs occur after a catalyst event, such as data releases from clinical trials, or FDA approval announcements. Consequently, if you watch the chart around these events, you may find opportunities for gap-fill trades.

The Bottom Line

Gap fills have huge reward potential, if you get the timing right and are patient. Biotech and pharma are particularly ripe for gap-fill plays because the nature of their development processes creates catalyst events that can create gaps in the first place, but don’t just jump into any gap you see because not all of these voids get filled.


  Kyle Dennis runs Kyle Dennis’ Biotech Breakouts (biotechbreakouts.com). He is an event-based trader, who prefers low-priced and small-cap biotech stocks.  

You may also like

Exclusive System Tracks Wall St. Insiders

“Dollar Ace Simply Exposes Information That Wall Street Wants To Keep Quiet” Said Kyle Dennis
“One member, Wesley M., has already reported 360%+ gains in just a few short days. Don’t miss this!”
(Reserve Access Now)

“What Recession?!” Jason Bond nets $55,060 in realized profit in One Day

After going 6 for 6 on profitable trades recently, we caught up with Jason to ask how he did it.
Check out Jason’s exclusive interview revealing this tightly guarded strategy. (Watch Now)

RagingBull.com Co-Founder, Jeff Bishop, Launches High Conviction Trade Service

“We listen to our clients and we give them EXACTLY what they want, so we designed a service to deliver 1 trade, 1 time a week, with a 100%+ PROFIT TARGET, directly to your inbox every Monday before the market opens. (Read More)

Be a Better Stock Trader, Starting Today

Get the expert insights, tips and strategies you need to optimize your trading skills and profiles