Gaps Stock Chart
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.
If you are interested in applying gaps technical analysis to your stock picks, you may want to consider signing up for a risk-free 14 day free trial of SmarTrend – and take the guesswork out of your trading.
Next: Technical Analysis: Chart Patterns - Triple Tops & Bottoms