Price Gaps

As of 04/24/2024

Indus: 38,461 -42.77 -0.1%

Trans: 15,078 -358.61 -2.3%

Utils: 893 +6.79 +0.8%

Nasdaq: 15,713 +16.11 +0.1%

S&P 500: 5,072 +1.08 +0.0%

YTD

+2.0%

-5.2%

+1.3%

+4.7%

+6.3%

Targets Overview: 04/12/2024

39,800 or 37,150 by 05/01/2024

16,200 or 15,000 by 05/01/2024

885 or 850 by 05/01/2024

16,700 or 15,800 by 05/01/2024

5,250 or 5,025 by 05/01/2024

Chart Pattern Indicator:

on 4/23/24

As of 04/24/2024

Indus: 38,461 -42.77 -0.1%

Trans: 15,078 -358.61 -2.3%

Utils: 893 +6.79 +0.8%

Nasdaq: 15,713 +16.11 +0.1%

S&P 500: 5,072 +1.08 +0.0%

YTD

+2.0%

-5.2%

+1.3%

+4.7%

+6.3%

Targets Overview: 04/12/2024

39,800 or 37,150 by 05/01/2024

16,200 or 15,000 by 05/01/2024

885 or 850 by 05/01/2024

16,700 or 15,800 by 05/01/2024

5,250 or 5,025 by 05/01/2024

Chart Pattern Indicator:

on 4/23/24

Bulkowski on Price Gaps

My book, Encyclopedia of Chart Patterns Second Edition

Encyclopedia 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.

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

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 Type	Discussion
Area, common or pattern gaps	These 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 gaps	Starts 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 gaps	These 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 gaps	Caused 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 gaps	Happens 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.

Gap: Trading Tips

Gap Type	Explanation
Area, common or pattern gaps	These close too quickly to be of trading significance.
Breakaway gaps	Look 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 gaps	On 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 gaps	These close too quickly to be of trading significance.
Exhaustion gaps	If 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 loss	Gaps 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).

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 Tactic	Explanation
Area, common or pattern gaps	3-4 days for both gap directions
Breakaway gaps	89 days for upward gaps, 84 days for downward gaps.
Continuation, measuring, or runaway gaps	45 days for upward gaps, 25 days for downward gaps.
Exhaustion gaps	6 days for upward gaps, 5 days for downward gaps.

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

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.