In this blog, Global Market Astro explains the commonly observed chart pattern- the gap and its types in the upcoming blogs. Hope it gives a greater understanding for the readers and helps them in making stock market forecasts.
GAP
A gap is an empty space generally occurring in a chart between one trading period and its previous trading period. These gaps usually form as a result of an important and material event that suddenly affects the price of the security such as earnings surprise or a merger agreement.
The gap in price movements are observed in bar and candlestick charts but not on line charts or point and figure charts. This is due to the reason that each and every point is connected in line, point and figure charts
These gaps occur in places where there is large enough variation in the opening price of a trading period where that price and the successive price movements do not fall within the range of the previous trading period. If suppose the price of a stock is trading at $30 and suddenly jumps to $37 in the next trading period, a large gap is formed over there.
There are four major types of gaps
- Common gap
- Breakaway gap
- Runaway gap
- Exhaustion gap
- Island reversal gap
Though these gaps are similar in structure, they differ only by the location in which they occur in the trend and the how they mean to the chartists in stock market trend analysis.
Source : https://www.globalmarketastro.com/blog/chart-patterns-gap-and-its-types/
Source : https://www.globalmarketastro.com/blog/chart-patterns-gap-and-its-types/
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