Gap (chart pattern): Difference between revisions

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* '''Breakaway gap''' – occurs when prices break away from an area of congestion. When the price is breaking away from a triangle (Ascending or Descending) with a gap then it can be implied that change in [[Market sentiment|sentiment]] is strong and coming move will be powerful. One must keep an eye on the volume. If it is heavy after the gap is formed then there is a good chance that market does not return to ''fill the gap''. When the price is breaking away on a low volume, there is a possibility that the gap will be filled before prices resume their trend.

* '''Common gap''' – also known as an ''area gap'', ''pattern gap'', or ''temporary gap'', tend to occur when trading is bound between [[support and resistance]] level on a short span of time and market price is moving sideways ("where the price trend...has been experiencing neither an uptrend nor a downtrend. Instead, the price activity has been oscillating between a relatively narrow range without forming any distinct trends").<ref>{{Cite web|url = http://www.investopedia.com/terms/s/sidewaysmarket.asp|title = Sideways Market / Sideways Drift|access-date = February 9, 2015|website = Investopedia}}</ref> One can also see them in price congestion area. Usually, the price moves back or goes up in order to ''fill the gaps'' in the coming days. If the gap is filled, they offer little forecasting significance.

* '''Exhaustion gap''' – signals the end of a move. These gaps are associated with a rapid, straight-line advance or decline. A reversal day can easily help to differentiate between the Measuring gap and the Exhaustion gap. When it is formed at the top with heavy volume, there is significant chance that the market is exhausted and prevailing trend is at halt which is ordinarily followed by some other area pattern development. An Exhaustion gap should not be read as a major reversal.

* '''Measuring Gap''' – also known as a ''runaway gap'', formed usually in the half way of a [[price]] move. It is not associated with the congestion area, it is more likely to occur approximately in the middle of rapid advance or decline. It can be used to measure roughly how much further ahead a move will go. Runaway gaps are not normally filled for a considerable period of time.

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|File:measuringgap new.jpg|<center>Measuring gap</center>

|File:exhaustiongap new.jpg|<center>Exhaustion gap<ref>[http://www.investopedia.com/terms/e/exhaustiongap.asp Exhaustion gap - investopedia.com]</ref></center>

|File:commongap new.jpg|<center>Common gaps<ref>[http://www.investopedia.com/terms/c/commongap.asp Common gap - investopedia.com]</ref></center>

|File:breakawaygap new.jpg|<center>Breakaway gap<ref>[http://www.investopedia.com/terms/b/breakawaygap.asp Breakaway gap - investopedia.com]</ref></center>

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