Markets are generally known to be overreacting. I saw this happen so many times and the last time I saw this was just yesterday.
Market open like this hasn’t happened for quite a long time. There were market gaps everywhere and volatility got really high.
Why did the market open this way? Funny thing is that nobody really knows. Sure, there is the coronavirus outbreak but nothing really unexpected happened during the weekend so why the gap and crazy volatility?
There was also the big news concerning the oil. I was talking about this in my yesterday’s video here:
Weekly Trading Ideas 9.3.2020 (Oil Special)
However, the oil news is not really the kind of news to cause such panic.
So, in my opinion markets are overreacting and I think it will all get back to normal again.
The market open on Monday created many nice gaps. There is still a lot of them which have not been filled yet.
As I showed you in one of my previous articles – gaps tend to get filled. If there is a significant Volume Cluster created before a gap then it usually works as a strong support/resistance.
More about the basics of this strategy here:
Gap trading strategy
Let me now show you some of the current gaps and do a small comment on each one of them.
Forex pairs which include the JPY were hit the hardest, created the biggest gaps and had the biggest volatility increase.
Even though the EUR/JPY made a 280 pip downwards move in one day it recovered quickly and just today it closed the opening gap.
As you can see in the picture below, there was a significant Volume Cluster created before the gap. The price reacted to it nicely and made a selling reaction. This is exactly how the “market open gap” setup is supposed to look like.