Gap Analysis on the Price Chart.

Gaps help us to identify the strength of the trend depending upon there type. Gaps are formed due to unexpected events occurring overnight, after market hours. The news can be any thing like local, national and international level. The gaps are formed due to changed in the perception of the traders mind, about the current market price of the company and that is reflected in the price on the new trading day . If the news is positive the stock gaps up and if the news is negative, the stock gaps down.
Depending upon the type of the gap, trader can find out the strength behind the trend and take up position.
Gaps acts like strong support or resistance points on the chart.
Area gap is not much significant for the traders.
Break out and runaway gap give traders offer trader safe entry points.
Exhaustion gap, gives the trader a clear signal that the existing trend is over and he should close the position held by him.
Gap analysis helps the traders to know the emotions behind the move and take position accordingly for his advantage.