As of 10/11/2019
  Indus: 26,817 +319.92 +1.2%  
  Trans: 10,292 +224.65 +2.2%  
  Utils: 867 -5.54 -0.6%  
  Nasdaq: 8,057 +106.26 +1.3%  
  S&P 500: 2,970 +32.14 +1.1%  
YTD
 +15.0%  
 +12.2%  
 +21.6%  
 +21.4%  
 +18.5%  
  Targets    Overview: 09/30/2019  
  Up arrow27,600 or 25,600 by 10/15/2019
  Up arrow11,100 or 9,700 by 10/15/2019
  Up arrow900 or 850 by 10/15/2019
  Up arrow8,300 or 7,700 by 10/15/2019
  Down arrow2,825 or 3,050 by 10/15/2019
As of 10/11/2019
  Indus: 26,817 +319.92 +1.2%  
  Trans: 10,292 +224.65 +2.2%  
  Utils: 867 -5.54 -0.6%  
  Nasdaq: 8,057 +106.26 +1.3%  
  S&P 500: 2,970 +32.14 +1.1%  
YTD
 +15.0%  
 +12.2%  
 +21.6%  
 +21.4%  
 +18.5%  
  Targets    Overview: 09/30/2019  
  Up arrow27,600 or 25,600 by 10/15/2019
  Up arrow11,100 or 9,700 by 10/15/2019
  Up arrow900 or 850 by 10/15/2019
  Up arrow8,300 or 7,700 by 10/15/2019
  Down arrow2,825 or 3,050 by 10/15/2019

Bulkowski's Price Gaps

 

Statistics updated on 11/8/2018.

My book, Encyclopedia of Chart Patterns Second EditionEncyclopedia of Chart Patterns 2nd Edition book., pictured on the left, covers 63 chart and event patterns, including gaps. The book discusses performance statistics and explores how gaps behave. It's worth buying a copy.

Image of a gap

Closed Gap and Gap

Gaps are useful for showing support or resistance zones but as a tradeable, by the time you properly identify them, the move is nearly over. If you already own a stock and a chart pattern breaks out in a gap, then hold on for a strong move. Performance improves two-thirds of the time in the chart patterns I looked at.

Gaps: Important Bull Market Results

Percentage of Upward gaps closing within a week:

Area gaps: 88%
Breakaway gaps: 1%
Continuation gaps: 8%
Exhaustion gaps: 58%

Percentage of downward gaps closing within a week:

Area gaps: 92%
Breakaway gaps: 1%
Continuation gaps: 14%
Exhaustion gaps: 67%

The above numbers, combined, are based on over 3,400 samples. See the glossary for definitions.

Gap: Identification Guidelines

Gaps occur when today's high is below yesterday's low (bearish gap), or today's low is above yesterday's high (bullish gap).

Gap TypeDiscussion
Area, common or pattern gapsThese are synonyms for the same gap type. Occurs in congestion (trendless markets) and closes quickly, usually in a few days. Volume on the gap day may be high but returns to normal in a day or two. Few new highs (upward trends) or lows (downward trends) occur after the gap. A distinctive price curl as the gap closes quickly is a clue to this gap type.
Breakaway gapsStarts a new trend and the gap often occurs on leaving a consolidation area, usually on high volume on the gap day, which can continue for several days. Price trends for several days.
Continuation, measuring, or runaway gapsThese are synonyms for the same gap type. Gap occurs during a straight-line advance or decline. Price makes new highs or lows without closing the gap. Volume is usually high.
Ex-dividend gapsCaused by a dividend distribution. Price moves down by the amount of the dividend and a gap appears but it's usually closed by the end of the trading day.
Exhaustion gapsHappens at the end of a trend on high volume. The gap is usually not followed by new highs or lows, and the gap may be unusually tall. After the gap, price consolidates or reverses direction. Commonly occurs after continuation gaps. Exhaustion gaps usually close within a week.

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Gap: Trading Tips

Gap TypeExplanation
Area, common or pattern gapsThese close too quickly to be of trading significance.
Breakaway gapsLook for a high volume gap and trade in the direction of the trend. The best performance comes from breakaway gaps in a bull market near the yearly high. In a bear market, trade those near the yearly low.
Continuation, measuring, or runaway gapsOn a time basis, usually marks the halfway point in an upward price move. By price, the middle of the gap appears between 50% and 52% along the very short-term trend (usually the distance between the closest minor high and low). Measure from the swing low or high to the gap center and project from the gap center to the predicted high or low.
Ex-dividend gapsThese close too quickly to be of trading significance.
Exhaustion gapsIf an unusually wide gap occurs, it may mark the end of the trend (immediately or within a few days). Violent reversals can follow an exhaustion gap, so consider taking a position in the new direction.
Stop lossGaps are places of weak support or resistance, but you can use them for a stop location. Place a stop a few cents below the gap (upward breakouts) or above the gap (downward breakouts).

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Median Time to Close the Gap (bull market)

Closing the gap means price rises/declines to fill the gap, covering the opening. See the chart near the top of this page for an example of a closed gap.

Trading TacticExplanation
Area, common or pattern gaps3-4 days for both breakout directions
Breakaway gaps96 days for upward breakouts, 90 days for downward breakouts.
Continuation, measuring, or runaway gaps46 days for upward breakouts, 27 days for downward breakouts.
Exhaustion gaps6 days for upward breakouts, 5 days for downward breakouts.

Tip: gaps that occur on the day of a chart pattern breakout suggest a better performing chart pattern two out of three times, regardless of the breakout direction.

Gap: Example

Gap chart pattern example

The above figure shows examples of various gap types. Breakaway gaps exit from congestion areas. Area gaps close quickly. Exhaustion gaps appear at the end of a trend. Continuation gaps show in the middle of trends.

-- Thomas Bulkowski

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Gap: Other Examples

See Also

 

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My novels:      New                  Bumper's Story Head's Law

Chart Patterns: After the Buy Getting Started in Chart Patterns, Second Edition Trading Basics Fundamental Analysis and Position Trading Swing and Day Trading Visual Guide to Chart Patterns Encyclopedia of Candlestick Charts Encyclopedia of Chart Patterns 2nd Edition Trading Classic Chart Patterns

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