Gaps are a common occurrence in the markets. Everyday there is always at least one stock that has gapped up or down when the market opens. Why? As long there is some event happening somewhere between the market close of the previous day to the opening of today, there will be gaps. Even if the markets eventually move little by little toward the inevitable 24-hour format, there will always be gaps.
After all, somewhere around the world, there is some event happening during the weekends as well. Plus, there is always an excited group of investors who making a big deal out of something or even for no reason unknown to the rest of us. So, gaps are a fact of life and there is no avoiding it. The best thing is to take it in stride and learn how to profit from it.
There are three different types of gaps: Breakaway, Runaway and Exhaustion gaps. Each of these gaps appear at a different cycles of the markets.