What is a key requirement when identifying a fair value gap related to momentum and wick coverage?

What is a key requirement when identifying a fair value gap related to momentum and wick coverage?

• A. Momentum is essential; FVGs are found in momentum breaks with no wick coverage.
• B. Momentum is not considered when identifying FVGs.
• C. FVGs can only occur during sideways markets.
• D. Momentum is required and you look for areas where wicks do not cover the gap.

Answer: (D)

In momentum-driven price action, a fair value gap shows up when price moves quickly in one direction, leaving an unfilled space between candles. The key requirement is twofold: there must be momentum behind the move, and subsequent candles should not fill that gap with their wicks. When wicks do not cover the gap, the unfilled area represents an imbalance where price hadn’t traded at those intermediate levels, making it a potential level for a pullback or retest toward value. If wicks do reach into the gap and fill it, the imbalance is absorbed and the gap loses its significance. That combination—momentum presence and lack of wick coverage—best identifies a meaningful fair value gap.

In momentum-driven price action, a fair value gap shows up when price moves quickly in one direction, leaving an unfilled space between candles. The key requirement is twofold: there must be momentum behind the move, and subsequent candles should not fill that gap with their wicks. When wicks do not cover the gap, the unfilled area represents an imbalance where price hadn’t traded at those intermediate levels, making it a potential level for a pullback or retest toward value. If wicks do reach into the gap and fill it, the imbalance is absorbed and the gap loses its significance. That combination—momentum presence and lack of wick coverage—best identifies a meaningful fair value gap.