Series 3: 6.2.2.4. Price Gaps

6.2.2.4. Price Gaps

Price gaps are prices on a bar chart where no trading has taken place. They are big increases or decreases in price that occur between the end of one trading period and the beginning of the next. On a bar chart, these large ups and downs in-between trading sessions appear as “gaps,” and they are most apparent on daily charts. In an uptrend, prices open higher than the highest price traded on the previous day. In a downtrend they open lower than yesterday’s lowest price. Upside gaps are signs of market strength; downside gaps signal market weakness. Gaps are often caused by new information, such as an earnings report becoming public after trading hours.

Breakaway (or breakout) gaps ar