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THE MARKET WHISPERER 35 7

Reciprocal Range Play

This method is applied to a stock which opens trading with a considerable
gap (opening price is significantly higher or lower than the previous day’s
closing price – see previous sections on this topic). The objective of this
method is to enter the stock after the gap is closed, when it technically
appears that it may continue moving to an equal distance in the opposite
direction.

Reciprocal Range Play for Myriad, MYGN

The chart shows MYGN’s behavior over two days of trading. MYGN
closed the first day at [1] and opened the next day with a gap up [2].
Several minutes after trading opened, it became clear that the stock was

moving down to close the gap. We have already learned that there is a clear

tendency for gaps to close on the same day of trading. Experienced traders

know how to take good advantage of this known opportunity, and many

execute shorts, “helping” the stock drop further.

As we see in the chart above, closing the gap is only half of the stock’s
movement. Sometimes, as in the case above, a “bi-directional” or reciprocal