Gap (chart pattern): Difference between revisions

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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 date|ex-dividend]]. Since each type of gap has its own distinctive implication, it is very important to be able to distinguish between such gaps.

* '''BreakwayBreakaway 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''' is also known as ''area gap'', ''pattern gap'' or ''temporary gap''. They tend to occur when trading is bound between [[support and resistance]] level on a short span of time and market price is moving sideways. 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, then they offer little in the way of forecasting significance.