Gap Analysis – Stage 8

When there is a difference between the opening price and the previous day’s closing price due to various factors such as an announcement or a news during non-trading hours, a gap is said to be formed. Area gap is formed when there is a difference within the area of support and resistance and it does not usually signify anything if the gap is filled. Breakout gap forms away from the area of support and resistance. if the volume is high it is an indication of a trend, if not it tends to be filled most likely and does not signify anything. Run away gaps forms in the middle of a trend and movement. it is an indication of the strength and it usually does not get filled. Exhaustion gap is formed at the peak of a trend and usually reversal happens as the buyers become sellers to book profit. usually the exhaustion gap is filled.