A gap down occurs when price opens below the prior day's low, creating a price vacuum. It reflects major overnight negative news with sellers eager to exit and buyers stepping aside.
Panic selling in action. The gap shows holders want out at any price while potential buyers refuse to step in. A larger gap = more panic. If the gap isn't quickly filled, the downtrend is confirmed.
After the gap forms, if a bounce back to the gap's lower boundary meets resistance, enter short (win rate 63%). Stop-loss above the gap's upper boundary. If the gap fills on the same day, the signal is invalid.
Not all gap downs are shorting opportunities. Determine whether it's a breakaway, continuation, or exhaustion gap.