Gaps and Gap Analysis

Runaway Gap

By March 17, 2016 December 1st, 2018 No Comments

Back to “Technical Analysis Guide”

Trend Intensification

It’s important that you spend some time familiarizing yourself with the terminology and techniques that have been helping people to make more informed decisions about their market trades for many years. Technical analysis is the practice of tracking and evaluating the past performance of a particular stock and using that data to educate decisions to buy or sell at a particular time.

Gaps in general are signals on the stock chart that the public thinking about a certain stock has changed overnight. When this happens, the day’s trading can open up with a much higher price than the previous day, resulting in a runaway gap between days on the chart. This gap is most likely to form near the middle of a confirmed uptrend, and should be interpreted as an indication that intensity of trading is increasing.

When there are strong bull or bear trends indicated on the charts, it’s likely that you might see a runaway gap from time to time. You can spot this gap by looking for a fast moving trend that suddenly gaps, and then continues quickly in the same direction as before. These gaps are usually an indication that interest in a certain stock has suddenly spiked or dropped off, usually in conjunction with a news media story about the stock, supply of materials, or the condition of the company in question. Don’t be alarmed however, because most analysts agree that these movements are only temporary.