Gap analysis

Gaps are areas on a chart where the price of a stock (or another financial instrument) moves sharply up or down, with little or no trading in between. Gap refers to the space between “where we are” (the present state) and “where we want to be” (the target state).
Gaps can provide clues about the price movement. If you read the breakup from price continuity you will find that something important has happened to the fundamentals or the psychology of the crowd that has triggered this market movement. Since, the inception of technical analysis, these “holes” have always been in the limelight of the chartist.
Gaps in trading are a common phenomenon and very commonly occurring in stocks. A gap is formed when the opening price for the day is higher or lower than the closing price of the previous day. A gap is nothing but an empty space between the closing price of the previous candle and the opening price of the next candle
The four types of GAP are : –
(a)AREA GAP
(b)BREAKOUT GAP
(c)RUNAWAY GAP
(d)EXHAUSTION GAP
Gap appearance on chart:-
On a technical analysis chart, a gap represents an area where no trading takes place means a market gap is the difference between the closing price of one period and the opening price of the next period.
Market gaps are most often created between trading sessions, such as during the night or over the weekend. A simple example would be a company surprisingly announcing its bankruptcy on a Saturday – traders would panic, and the opening price on the Monday could open below the closing price on the Friday.