Today’s market reaction for SPY was a gap-up after a bullish hammer candle day. It got me wondering about the average rate of gap-ups coming down to pre-gap levels.
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There is no precise universally accepted “average rate” for how often a gap-up returns to its pre-gap level. The available research gives a range of probabilities depending on conditions. Key findings:
What the data shows
- One study of large gaps (±2 standard deviations) in ~20 S&P 500 stocks found about 5% fill rate within the same day. TastyLive
- Extending to ~45 days increased the chance of a fill to “more than half” in that sample. TastyLive
- Another study covering US stocks 1928-2018 found that the probability a gap would be filled within 5 days was very low (~20%). ResearchGate
- For moderate gaps (≥1% up opening) in the SPY/QQQ context: roughly 45% same-day fill, and ~53% within two days. SharePlanner
- Also a statistic: gap-up days have ~72% chance to close higher than the prior close (not necessarily fill the gap). Quantified Strategies
Summary for your setup (learning/trading)
If you are tracking a stock that gaps up:
- Expect a less than 50% chance that it will return all the way to the previous close within one or two days.
- If you broaden the time horizon (several days to weeks), the chance increases—but still no guarantee.
- The size of the gap, type of gap (common vs breakaway), market context, volume and news matter a lot.
Levers you can use
- Filter by gap size (e.g., >1% or >2%) and test for your universe of stocks.
- Categorize gap type: large news‐driven (exhaustion/breakaway) vs small everyday.
- Track time interval to fill (intraday, 1-2 days, 5+ days).
- Monitor volume and market regime (trending vs ranging).
- Build your own backtest for the instruments and time interval you trade.
