Gap Analysis – Cap of Technical Analysis

Gap Analysis is the difference between yesterday’s closing Price and Today’s opening price. It gives the idea of the strength and Phase of the trend.Gap can be named by the phase it occurs.
Types of GAP: Area Gap, Run Away Gap, Break out Gap, Exhaustion Gap.The difference in trading range of two consecutive days creates a GAP.
Gap happens because of some external force such as a positive news breakout. Since it creates price change considerably overnight it carries some risk.Charecteristics of Area Gap:
1. It happens in Non Trending Area.
2 Usually, the gap gets filled up.A breakout gap indicates the presence of strong sellers or buyers in the market who are changing or establishing the trend of the market. The gap should appear outside the non trending area of the market. The volume should be high. A type of gap on a price chart that occurs during strong bull or bear movements characterized by an abrupt change in price and appearing over a range of prices. They are best decribed as gaps caused by an sudden increase/decrease in interest for a stock.. It is easy to detect an exhaustion gap in hindsight; however, distinguishing an exhaustion gap from a runaway gap at the time of the gap can be difficult because the two share many characteristics. Popular wisdom suggests that trading exhaustion gaps can be dangerous. An exhaustion gap signals the end