Gap Analysis — Gap (%) and Gap+5min Parameters

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What is Gap Analysis in DCMM?

Gap Analysis in DCMM tracks and quantifies overnight price gaps — the difference between yesterday’s closing price and today’s opening price. Two distinct gap measurements are provided: Gap (%) (the opening gap) and Gap+5min % (the gap measured 5 minutes after the open).

Gap (%) — Opening Gap

Gap (%) measures the percentage difference between:

  • Open Price (today’s opening price) vs.
  • Last EOD Price (yesterday’s official closing price)
Gap (%) = (Open Price - Last EOD Price) / Last EOD Price × 100

A positive gap (gap up) means the stock opened higher than yesterday’s close. A negative gap (gap down) means it opened lower.

In the context of a DCMM drawdown setup, a gap down on the open often represents an additional discount opportunity — it potentially extends the DD cycle and may improve the entry price relative to TP/SL levels.

Gap+5min % — Confirmed Gap Direction

Gap+5min % measures the price change from the opening price to the price 5 minutes after the open. This is critical because:

  • An opening gap may be “filled” (reversed) within the first few minutes of trading
  • Gap+5min confirms whether the gap direction is being sustained into the trading session
  • A positive Gap+5min after a gap down suggests buying interest is emerging and supports the mean-reversion thesis
  • A negative Gap+5min after a gap down (continuation lower) may indicate more selling pressure and warrant waiting for further stabilization

Gap Analysis and the DCMM Setup

Gap behavior is particularly relevant for DCMM mean-reversion setups:

  • Gap down on a DD=3+ stock: Often creates an improved entry point. The extended drawdown may activate additional Historical Twins and potentially improve P(Up D+1) if the stock was already near key statistical support levels.
  • Large gap down (> -3%): Warrants checking Z-Score — a very large gap down may indicate a news event that invalidates the historical pattern.
  • Gap up on a DD setup: May partially or fully negate the pullback, reducing the statistical edge. Check if the stock still qualifies under the original DD criteria after the gap.

Gap Data in the Dashboard

In the DCMM Extended and Deep dashboards, the Gap columns appear between the main price data and the LRB Pinball/Z-Score section. The data shows:

  • Gap (%) — Color coded: green for gap up, red/pink for gap down
  • Gap+5min % — Direction of early session price movement
  • Open Price — Actual opening price for the current session
  • Last EOD Price — Previous day’s closing price

Practical Application

For traders using DCMM for intraday entries:

  1. Check Gap (%) for each DD setup at the open
  2. Wait for Gap+5min data to confirm gap direction
  3. If gap down + Gap+5min showing reversal signs → potential improved entry
  4. Adjust TP/SL levels based on actual open price rather than yesterday’s close

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