Gap Analysis

Price charts often have blank spaces known as gaps, which represent times when no shares were traded within a particular price range. Normally this occurs between the close of the market on one day and the next day’s open. There are two primary kinds of gaps – up gaps and down gaps.

For an up gap to form, the low price after the market closes must be higher than the high price of the previous day. Up gaps are generally considered bullish.

A down gap is just the opposite of an up gap; the high price after the market closes must be lower than the low price of the previous day. Down gaps are usually considered bearish.