[The following is a reprint of an article in The W. D. Gann Technical Review , written by Billy Jones in August 1982.]

Throughout the years of studying Gann, I have learned many valuable techniques by spending hours pouring over his charts and scrutinizing every number and every angle that he drew. One such technique is what I call the "gap theory".

On some Gann charts, I noticed that Gann had drawn lines up through gaps from nearby bottoms, and drawn lines down through gaps from nearby tops. Quite often two, three, or more gaps would intersect at some point/price in the future, and to my surprise, the stock or commodity would trade back up (or down) to the price where the gap lines crossed!

To better illustrate this gap theory, I have pictured two May Orange Juice Weekly charts from 1979 to 1981. They show you how you could have foreseen the rise in orange juice prices because of the gap theory.

Take chart A and where prices gap down, draw a line from the nearest accessible bottom through the gap so that the line touches the bottom of the gap. This gives you your Least Gap Line. Sometime in the future, prices will at least return to this line.

If you draw a line from the nearest accessible bottom through the gap so that it touches the top of the gap, this line indicates that prices could even go as high as that line. But it is the Least Gap Line that is important.

The importance of these gap lines is when you have two or more gap lines meet. The more gap lines you have crossing at a certain place and time, the stronger the indication that prices will reach that price at that time.

The reverse of all this is gaps up in the market. Draw lines from the nearest accessible top down through the gap to give you an idea where prices will return to.

Important ö gaps that occur because of change of contracts do not count as gaps and are not to be used in the gap theory. Also, the gap theory works the best on weekly charts.

As you can see from Chart B, four gap lines crossed at about the same price (146) and time (February 6, 1981) which was a very strong indication that prices would reach this level. And what a move it was when prices did reach 145 1/2!

As with all Gann techniques, this gap theory should be used in conjunction with other Gann techniques. You shouldn't trade off of only one technique.