Gap in technical analysis indicates the strength.
The Gap appears due to difference in the trading range i.e. when there is any positive news or any positive terms in the market.
When there is a negative news or any negative terms in the market after the market closing time, then it will be the overnight risk.
Gap helps to locate the phase(stage) of the trend.
1. Area Gap – The Gap appears between demand and supply zone with low volume and gets filled in short term.
2. Breakout Gap – The Gap appears during a breakout with high volume and it will remain open.
3. Runaway Gap – The Gap appears after the breakout and while moving in the trend with significant volume due to lack of sellers i.e. sellers become buyers
4. Exhaustion Gap – The Gap is created at the start of the day
i.e. starting price is much higher than the previous day’s highest price but gets closed by end of the day with Red body with high volume.
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