Understanding Price Gaps

A price gap occurs when a security opens noticeably above or below its previous close, leaving a visible blank space on the chart where no trading occurred.

Gaps commonly appear around scheduled news, earnings, or when markets reopen after a period of closure, such as a weekend, and their significance often depends on where they occur relative to the broader trend.

• Breakaway gap: Occurs at the start of a new trend, often on a surge in volume, and tends to be less quickly filled.
• Runaway (continuation) gap: Appears in the middle of an established trend and can reflect strong ongoing momentum.
• Exhaustion gap: Occurs near the end of an extended move and is sometimes followed by a reversal shortly after.