Normal gap always fill up.
Gaps generally indicates breakout or breakdowns that happens due to liquidity problems,sudden change in fundamentals or sentiments
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Thread 🧵 on Gap Analysis in charts
Have you ever wondered what causes gaps in price charts and what they mean?
Well ,you have come to the right place
Gap is an area in chart where no trade took place and this happens between close of a market and next days opening 👇
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Normal gap always fill up.
Gaps generally indicates breakout or breakdowns that happens due to liquidity problems,sudden change in fundamentals or sentiments
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Before we get into different types of gap formation here is a chart showing a gap so that you may know what we are talking about
A gap is formed during uptrend(price moving up)
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This are common and may happen regularly in smaller timeframes
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1)Common Gap
2)Breakaway Gap
3)Runaway Gap
4)Exhaustion Gap
We will understand each gap deeply why it is formed and the psychology behind each
Here is a chart showing all the 4 gaps together
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This gaps are also referred to as trading gap and are really uneventful which naturally happens everyday so its common.
Congestion area create this gaps and notice after gap up generally price moves to beginning of the gap.
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Here is a chart showing common gap that is filled in next 2 days
Next gaps are actually interesting 😃
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This gaps are formed when price is breaking any trading range for example major support or resistance area in congestion area
A congestion area is just a price range where the market has traded for some period of time or weeks.
Check this chart
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Volume should pick up significantly,for not only increased enthusiasm but people sitting on wrong side to cover position
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Sometimes it may take 2-3 years to fill this gap(noticed in few stocks)
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They are also called measuring gaps and are best described as gaps that are caused by increased interest in the stock
This gaps are created in almost panic or satisfaction scenarios where volume comes during and after the gap
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News based action make this gaps generally(govt policy changes,results,etc)
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This chart is showing a runaway gap with huge volume
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This gaps are created near any major top or bottom basically near the end of any major up or downtrend
A pattern is formed after this gap that reverses the trend with huge volume and also marks the end of previous trend
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This gap are filled easily as price reverse their trend
Volume increases more after breakdown or breakout
In the chart notice there was one more day of trading after which stock plunged down
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