Gap Analysis

GAP is the difference in the trading range, which can be seen using candlesticks charts. The chart will indicate a GAP in the candlestick view. GAP indicates the strength of the trend and helps to locate whether the trend is at early stage, breakout stage or at terminating stage.
GAPS appear on charts when there is a important event or news occurs which affects the security. Overnight risks occur when a news or event which affects the security occurs after closing of the market. It has gap impact on the price of security on the next trading day.
Area gap – will appear inside the trading range(Non trending area) . It may be filled in near term. If gap not filled which indicates the weakness of counter party. The volume during the Gap day is generally low.
Breakout gap – will appear only when price give breakout from its trading range. Area Gap may not be filled in near term. The volume during the gap day should be high.
Runaway gap – Post breakout, the runaway scenario take place, its indicated the sellers buy back the shares. This gap appear inside the trending zone, it may not be filled in near term. The close should be at its day’s high during Runaway gap. The volume is distributed evenly during the day.
Exhaustion gap – The gap appear after the trending zone seems to be a Runaway gap but if it get filled on a same Day then it can be considered to be Exhaustion gap. The close should be at day’s low during runaway gap. The volume should be very high during the day to terminate the existing trend.