Looking at the pre-market quotes, there is a significant gap down.
“It looks like it’s going to be a very weak day.”
A stock you thought that about starts rising immediately after the 9:00 AM opening.
It doesn’t break below the low set in the morning and keeps rebounding.
This type of price movement is called
“morning bottom”
.
It is the opposite price movement to a ‘morning top’.
You should be especially careful in the case of
“significant gap down = weak, so short sell”
, where you sell immediately after the opening thinking that.
Gapping down and being sold after the opening are two different things.
In this article, we will cover:
-
What a morning bottom is
-
Why stocks that gap down rebound
-
What it means for selling to run its course
-
How to interpret the low immediately after the opening
-
The significance of recovering the opening price
-
The relationship with VWAP
-
Combination with trading volume
-
Comparison with market conditions
-
The danger of assuming it is an opening low
I will explain about these.
What is an opening low?
An opening low generally refers to
price action where the day’s low is set near the opening, followed by a rise in the stock price
.
For example,
Previous day’s closing price 3,000 yen
Next day’s opening price 2,700 yen
Let’s assume this.
It is a significant gap down.
However,
Opened at 2,700 yen
↓
2,680 yen
↓
2,750 yen
↓
2,850 yen
↓
2,950 yen
and rose.
As a result, the morning low of 2,680 yen became the low for the day.
This is the typical image of an opening low.
Why does it rise even after a gap down?
Gapping down means that trading has started at a price lower than the previous day’s closing price.
So, why does it rise from there?
One reason is that
sell orders are digested to some extent by the opening bell
.
People who wanted to sell due to bad news or worsening market conditions placed a large number of orders from the morning.
As a result, the stock opened at a significantly lower price.
However, once the price actually becomes low,
‘I want to buy at this price’
people may also increase.
If buying can absorb the selling, the stock price will rebound.
Even if bad news comes out, it can still result in an opening low
If bad news is released about a company, the stock price may fall.
However, what is important is
to what extent the stock price had already priced in that bad news when it opened
.
For example,
Previous day’s closing price 3,000 yen
Bad news announced
Opened the next day at 2,400 yen
Let’s assume this is the case.
It is a -20% gap down.
Among market participants,
“There is bad news, but isn’t -20% oversold?”
Some people may start to think this.
Then, buying comes in after the opening, and it may rebound.
Check the gap down percentage
When considering an ‘opening low’,
check how much it has gapped down from the previous day’s closing price.
For example,
Previous day’s closing price: 3,000 yen
Opening price: 2,970 yen
That is about -1%.
On the other hand,
Opening price: 2,550 yen
That is -15%.
The larger the gap down,
“It has become quite cheap.”
the more likely it is that buyers will appear who think,
However,
…
A significant gap down does not mean it will rebound.
That is not the case.
If the negative news is extremely significant, there is a possibility that it will be sold off even further after the opening.
Looking at the low price immediately after the opening
What is important when considering a ‘Yorizoko’ is
the low price reached immediately after the opening
.
For example,
Opening price: 2,700 yen
First 5-minute candle low: 2,650 yen
Let’s assume this was the case.
After that,
Rose to 2,750 yen
↓
Pulled back to 2,680 yen
↓
Reached 2,750 yen again
It became.
It did not break below the initial low of 2,650 yen.
In other words,
Maintaining the low set by the initial sell-off
is the state.
Raising the lows
Furthermore,
Initial low of 2,650 yen
↓
Next low of 2,680 yen
↓
Next low of 2,720 yen
If this happens,
it is a rising low
.
Every time it drops, buying is coming in at a higher price than before.
The strong selling immediately after the opening is gradually weakening, and there is a possibility that buying is becoming dominant.
Can it recover the opening price?
For example,
Opening price of 2,700 yen
Drops to 2,650 yen immediately after the opening
Let’s assume it did.
From there,
2,680 yen
↓
2,700 yen
↓
2,720 yen
and rose.
It recovered to the opening price.
Although it was being sold below the opening price immediately after the market opened, it absorbed that selling pressure and returned above the opening price again.
This becomes one point to look at when observing ‘Yorizoko’ type price movements.
Can it break through the high of the first 5-minute candle?
Check not only the low but also the high.
For example, suppose the first 5-minute candle was,
Opening price 2,700 yen
High 2,750 yen
Low 2,650 yen
Closing price 2,730 yen
and that was it.
In the next 5-minute candle,
2,750 yen
was broken through.
Furthermore,
2,800 yen
was reached.
It is updating the high set in the first 5 minutes.
Updating the high while maintaining the low
is the price movement occurring.
Can it recover to the VWAP?
As time passes from the opening, I also check the VWAP.
For example,
Gap Down
↓
Decline immediately after the opening
↓
Rebound
↓
Recovery to the opening price
↓
Recovery to VWAP
This is the sequence.
Furthermore,
Pullback to VWAP
↓
Rebound near VWAP
↓
New high
If this happens, the price is moving above the average trading price for the day.
This serves as a factor to determine if the opening-low type of uptrend is continuing.
Look at the trading volume
Trading volume is important even for an opening low.
For example,
A sharp drop on high volume immediately after the opening
↓
Formation of a low price
↓
Rebound on high volume
This is one such case.
Although a large amount of selling occurred, a large amount of buy orders also came in.
After that,
if it does not break the low and instead breaks the high,
you can tell that buying has become dominant.
However,
high volume does not necessarily mean a bottom has been reached
.
You must also confirm which way the stock price moves after the volume increases.
Look at the long lower shadow
On the 5-minute chart immediately after the opening,
a long lower shadow
can occur.
For example,
Opening price 2,700 yen
Low price 2,550 yen
5-minute candle closing price 2,690 yen
Let’s assume this was the case.
Although it was sold down to 2,550 yen once, it has been bought back significantly from that price range.
It is clear that buying was strong near the low.
However,
lower shadow = buying
is not necessarily true.
If it breaks below 2,550 yen again in the next 5-minute candle, the decline may resume.
I check the subsequent price movement as well.
Comparing with the Nikkei Stock Average
I prioritize market sentiment in day trading.
The same applies to an opening low.
For example,
Individual stock gaps down
Nikkei Stock Average also gaps down
Let’s assume this was the case.
However, after 9:00 AM,
the Nikkei Stock Average rebounds sharply.
Individual stocks also turn around at the same time.
In this case,
it may be an opening low due to improved market sentiment.
there is a possibility that it has become.
Especially for stocks with high index correlation, the rebound of the Nikkei Stock Average becomes important.
Cases where it rises even though the market sentiment is weak
Conversely,
the Nikkei Stock Average is hitting new lows
even though,
individual stocks do not break their morning lows and hit new highs.
In this case, it is a relatively strong movement against the market sentiment.
Even though the market as a whole is weak, buying is coming into that stock.
Such,
differences in strength between indices and individual stocks
it is also important to look at.
Moving from a gap down toward filling the gap
It also connects to the ‘gap filling’ explained in number 18.
For example,
Previous day’s closing price: 3,000 yen
Next day’s opening price: 2,700 yen.
It becomes an opening low pattern, and
2,750 yen
↓
2,850 yen
↓
2,950 yen
rises as follows.
It is returning to the previous day’s price range.
In other words,
Significant gap down
→ Opening low
→ Direction of filling the gap
is the flow.
There are times when it suddenly drops again from the opening low
This point is extremely important.
Just because it rebounded in the morning,
it does not mean that the day’s low has been confirmed.
For example,
opens at 2,700 yen
↓
2,650 yen
↓
rebounds to 2,800 yen
↓
Nikkei Stock Average plunges
↓
Falls below 2,650 yen
↓
2,550 yen
—this can also happen.
It may have looked like an opening low in the morning, but it goes on to hit new lows later.
Do not jump to the conclusion that it is a ‘confirmed opening low’
In real-time, you cannot know if the day’s low has truly been set.
Only after the trading session ends,
do you realize,
‘It turned out to be an opening low.’
Therefore, in day trading,
‘It is an opening low’
instead of deciding that,
‘It is currently showing opening low price action’
is how you should think about it.
If it hits a new low, revise your scenario.
5 points to check for an opening low pattern
1. Gap down percentage
How much lower did it start compared to the previous day’s closing price?
② Low price immediately after the opening
Can it maintain the initial low price?
③ Opening price
Can it recover to the opening price after an initial decline?
④ VWAP
Can it recover to the VWAP and maintain its position above it?
⑤ Market sentiment
Are indices like the Nikkei 225 also rebounding?
Summary
A ‘Yorizoko’ generally refers to
a price movement where the day’s low is set near the opening, followed by a rise in the stock price
.
Especially for stocks that gap down,
selling occurs to some extent by the opening
→ buying enters at a low price
→ selling is absorbed
→ the stock price rebounds
can occur.
However,
a gap down does not always mean a ‘Yorizoko’
.
In day trading,
Gap down rate
→ Initial low
→ Higher low
→ Recovery to opening price
→ Recovery to VWAP
→ Trading volume
→ Market sentiment
We will check in this sequence.
And the most important thing is,
not to predict that ‘it will rebound because it has fallen this much,’ but to see if there is actual price action showing that selling is being absorbed and the price is rising
.
If the price hits a new low, do not cling to the ‘opening low’ scenario.
Changing your judgment in line with market movements is crucial in opening-bell day trading.
For those who want to learn more about day trading
On YouTube, I conduct a live day trading stream every morning from 8:30.
While watching the actual market, I explain indices like the Nikkei 225, as well as decisions on entries, profit-taking, and exits in real-time.
▶ Click here for YouTube
[YouTube Link]
For those who want to learn in more detail
In the YouTube membership, I release content that cannot be fully covered in regular videos or live streams through exclusive videos.
Past videos and live streams are also moved to members-only status after a certain period has passed since their release.
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For those who want to practice day trading with a game
I believe that in day trading, it is important not only to memorize knowledge but also to repeatedly make decisions such as ‘buy, sell, wait, or exit’ while watching the market.
Therefore, I have released a day trading game where you can practice the concepts I prioritize in actual trading, such as indices, market sentiment, and supply and demand, in a game format.
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※ This article is provided for the purpose of learning knowledge and ways of thinking related to investment, and does not recommend the buying or selling of specific stocks or financial products. Investment carries the risk of loss, including the loss of principal. Please make actual investment decisions based on your own judgment and responsibility.
