How the pattern unfolds
The setup
Stock A has a previous range low near 247. It opens sharply lower, gapping below that level.
What triggers it
The decline is absorbed. Price prints a lower wick, stops falling, and reclaims the prior range low through the session and the following days.
What it means — and does not
Reclaiming the prior range low after a gap-down is the reversal footprint. The mechanic is absorption of opening supply. As always it is descriptive, and on other days a gap-down can equally keep falling.
- Price / index level
- Volume
- Previous range low · 247
A gap-down below 247 on day 4 is absorbed and reclaims the prior range low.
Show the underlying data
| Day | Price / index level | Volume |
|---|---|---|
| 1 | 250 | 1 |
| 2 | 248 | 1.1 |
| 3 | 247 | 1.2 |
| 4 | 234 | 2.6 |
| 5 | 238 | 2.1 |
| 6 | 244 | 1.8 |
| 7 | 251 | 1.9 |
| 8 | 255 | 1.5 |
| 9 | 258 | 1.3 |
What this does not establish
The reversal reading is invalidated if price loses the prior range low at 247 again on a close. The low of the reversal session is conventionally treated as the invalidation level, and a stop-loss is anchored below it. A trade back through it means the gap was the start of a decline, not an overreaction being absorbed.
Confirmation checklist
4Did price reclaim the prior range low, or keep falling?
Was there a lower wick and stabilising price action?
Did breadth or volume show absorption rather than continuation?
Remember: not every gap-down reverses. This is one pattern, not a signal.
Common mistakes reading it
2Assuming any gap-down will bounce. Many continue lower.
Calling a reversal before the prior range low is actually reclaimed and held.
Why is this page the mirror of the gap-up page rather than a separate lesson?
- Because gaps are known to behave symmetrically in every liquid market, in both directions
- Because gap-downs reverse more often
- Because it is the same mechanic with the sign flipped
Show the answer
C. Because it is the same mechanic with the sign flipped
Learning the mechanic once beats memorising a bullish picture and a bearish one separately. Neither page claims symmetry as a fact about markets, and neither claims one direction reverses more often — one example cannot establish either.
Frequently asked
3Does a gap-down always recover?
No. Many gap-downs continue lower. A reversal is the specific case where selling is absorbed and the prior range low is reclaimed.
What is absorption?
Absorption describes buyers meeting the opening supply so price stops falling and recovers, often leaving a lower wick.
Is this a buy signal?
No. It is an educational explanation of a price-action mechanic, not a recommendation.