Are jumbo gaps an oxymoron like "jumbo shrimp"? I found some similarity between shrimp sizes and normalized up-side gaps (see Chart 1). Do such jumbo gaps offer trading opportunities? I tried to quantify just that, and here is what I found. By the way, just as the number of shrimp per pound drops rapidly once the size goes above "Jumbo", similarly the frequency of occurrence of upside gaps (normalized by the 10-day average true range) drops rapidly past some critical "Jumbo" size. I decided to focus my exploration on such jumbo gaps.
Figure 1: The visual is to remind me I am looking for a jumbo shrimp in a gap: a large gap in an otherwise ordinary string of stock prices.