Gaps can be classified into four groups:
Breakaway gaps occur at the end of a price pattern and signal the beginning of a new trend.
Exhaustion gaps occur near the end of a price pattern and signal a final attempt to hit new highs or lows.
Common gaps cannot be placed in a price pattern – they simply represent an area where the price has gapped.
Continuation gaps, also known as runaway gaps, occur in the middle of a price pattern and signal a rush of buyers or sellers who share a common belief in the underlying stock’s future direction.
