Understood what is Gap analysis and why is it used , types of Gap and the reason why it is created .
- : It is used to identify the strength of the directional movement in the market. it will indicate if the market trend is moving with or without strength. Like if the prices are moving high, is it because of aggressive buying or just cluster buying or in the other hand , if the price is moving down , is it because of aggressive selling or just some profit booking.
- : Four types of GAP analysis are Area Gap , Breakout Gap , Runaway Gap and Exhaustion Gap.
- : It appears due to the difference in the trading price range overnight. It helps us to locate the current phase of the GAP , as if we are at the early stage of the trend or if we are the the termination stage of the trend.
- : It when there is a sideways movement ( or non trending zone ) after a trending zone . at this non trending zone , if the GAP occurs between the supply zone and the demand zone , the chances are that this gap will fill soon. if the gap fills soon then it can be neglected as we will not know if the buyer or seller is stronger. But if the gap does not fill and if it is between the non trending zone , then it is an earlier indication of a negative breakout.
- : during a sideways trend , when the price goes down , during the next day the trend moves out of the range with a huge volume.Breakout gap appear during the beginning of the new trend. this gap should not be filled as the opposite party is aggressive ( Buyers stronger against sellers in Bullish breakout and Vice versa)
- : after an upper trend followed by a sideways movement and after a breakout ( out of range ) , while moving forward it opens far up and keep moving up. if it is a bullish trend, seller will loose control and the has to buy back to prevent loss and thereby creating more demand and increasing the price ( basically sellers are running away from this zone). this happens in the trending zone above the breakout zone. the gap is not expected to close and the trend i expected to go further.
- : exhaustion gap occurs when there is a gap appearing when opening and getting disappeared at the EOD. exhaustion gap may appear after a significant rally , it generally terminate the existing trend.
- : all the gaps are shown in the upward trend,
- : (contd,) will thr b gap in the lower trend also