Gap (chart pattern): Difference between revisions

Revision as of 17:27, 11 November 2010

Revision as of 17:34, 11 November 2010

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[[Image:Allgaps new.jpg|right|thumb|350px400px|Sequence of Gaps]]

{{Unreferenced|date=July 2010}}

[[Image:Allgaps new.jpg|right|thumb|350px|Sequence of Gaps]]

A '''gap''' is defined as an unfilled space or interval. On a [[technical analysis]] chart, a gap represents an area where no trading takes place. On the Japanese candlestick chart, a window is interpreted as a gap.

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There are four different types of gaps, excluding the gap that occurs as a result of a stock going [[ex-dividend]]. Since each type of gap has its own distinctive implication, it is very important to be able distinguish between such gaps.

:* Breakaway gap

:* Common gap

:* Ex-dividend gap

:* Exhaustion gap

:* Measuring gap or Runaway gap

'''Example of 4 types or gaps (Ex-dividend gap excluded)'''

* '''Breakway gap''' : It 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 [[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.

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|width=250

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

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

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

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

}}

== References ==

{{reflist}}

==External links==

* [http://www.investopedia.com/university/charts/charts8.asp ''Analyzing Chart Patterns: Gaps''] at investopedia.com

* [http://www.investopedia.com/articles/trading/05/playinggaps.asp ''Playing The Gap''] at investopedia.com

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{{DEFAULTSORT:Gap (Technical Analysis)}}

[[Category:Stock market]]

[[Category:Technical analysis]]