Gaps Stock Chart

Gaps Pattern

An area of empty space on a stock chart is what’s recognized as a gap pattern. This gap is the duration of time that exists between two trading periods. The gaps stock chart is usually indicative of a substantial change in the price point of a stock between sequential trading periods.

If a company experiences better-than-expected earnings, their stock chart may feature a gaps pattern. For example, if the trading range for the company’s stock opens between $20 and $25 during one trading period and then opens at $45 at the start of the next trading period, this change in stock price will cause a significant gap pattern to be present on their stock chart.


Types of Gap Stock Chart Patterns

There are three types of gap patterns that make up a gap stock chart. These include:

Breakaway gap patterns
A gap pattern that forms at the start of a trend

Runaway gap patterns
A gap pattern that forms in the middle portion of a trend

Exhaustion gap patterns
A gap pattern that develops near the end of a trend

On a side note, a gaps stock chart can be found on both bar and candlestick charts; however, they are not seen on basic line charts or point and figure charts.

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Next: Technical Analysis: Chart Patterns - Triple Tops & Bottoms