Gap-Down Reversal: Absorption Below the Range
A gap-down opens well below the prior close. When the selling is absorbed — price leaves a lower wick and reclaims the prior range low — it is described as a gap-down reversal. It mirrors gap-up exhaustion on the downside.
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 |
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 following days.
What it means
Reclaiming the prior range low after a gap-down is the reversal footprint — absorption of opening supply. As always it is descriptive; a gap-down can equally keep falling on other occasions.
Confirmation checklist
- Did 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
- Assuming any gap-down will bounce — many continue lower.
- Calling a reversal before the prior range low is actually reclaimed and held.
Metric glossary
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Definition →Frequently asked
Does 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.
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