Signs Of Trend Reversal
Hey Team,
If it holds, this could be a sign of a reversal; fingers crossed. Also large gap in pricing! A gap is an area discontinuity in a security's chart where its price either rises or falls from the previous day's close, with no trading occurring in between. Gaps are common when news causes market fundamentals to change during hours when markets are typically closed, for instance, an earnings call after-hours.
What Does A Gap Tell You?
Gaps typically occur when a piece of news or an event causes a flood of buyers or sellers into the security.
It results in the price opening being significantly higher or lower than the previous day's closing price.
Depending on the kind of gap, it could indicate either the start of a new trend or a reversal of a previous trend.
KEY TAKEAWAYS
A gap is a discontinuous space in the price chart of an asset or security, often occurring between trading hours. There are four different types of gaps:
Common Gaps
Common gaps generally get filled relatively quickly (usually within a couple of days) when compared to other types of gaps. Common gaps are also known as "area gaps" or "trading gaps" and tend to be accompanied by normal average trading volume.
Breakaway Gaps
A breakaway gap occurs when the price gaps above a support or resistance area, like those established during a trading range. When the price breaks out of a well-established trading range via a gap, that is a breakaway gap. A breakaway gap could also occur out of another type of chart pattern, such as a triangle, wedge, cup and handle rounded bottom or top, or head and shoulders pattern.
Runaway Gaps
A runaway gap, typically seen on charts, occurs when trading activity skips sequential price points, usually driven by intense investor interest. In other words, there was no trading, defined as an exchange of ownership in security, between the price point where the runaway gap began and where it ended.
& Exhaustion Gaps
An exhaustion gap is a technical signal marked by a break lower in prices (usually on a daily chart) that occurs after a rapid rise in a stock's price over several weeks prior. This signal reflects a significant shift from buying to selling activity that usually coincides with falling demand for a stock. The implication of the signal is that an upward trend may be about to end soon.
Gaps are easy to spot, but determining the type of gap is much harder to figure out.
Source: Investopedia.com
If it holds, this could be a sign of a reversal; fingers crossed. Also large gap in pricing! A gap is an area discontinuity in a security's chart where its price either rises or falls from the previous day's close, with no trading occurring in between. Gaps are common when news causes market fundamentals to change during hours when markets are typically closed, for instance, an earnings call after-hours.
What Does A Gap Tell You?
Gaps typically occur when a piece of news or an event causes a flood of buyers or sellers into the security.
It results in the price opening being significantly higher or lower than the previous day's closing price.
Depending on the kind of gap, it could indicate either the start of a new trend or a reversal of a previous trend.
KEY TAKEAWAYS
A gap is a discontinuous space in the price chart of an asset or security, often occurring between trading hours. There are four different types of gaps:
Common Gaps
Common gaps generally get filled relatively quickly (usually within a couple of days) when compared to other types of gaps. Common gaps are also known as "area gaps" or "trading gaps" and tend to be accompanied by normal average trading volume.
Breakaway Gaps
A breakaway gap occurs when the price gaps above a support or resistance area, like those established during a trading range. When the price breaks out of a well-established trading range via a gap, that is a breakaway gap. A breakaway gap could also occur out of another type of chart pattern, such as a triangle, wedge, cup and handle rounded bottom or top, or head and shoulders pattern.
Runaway Gaps
A runaway gap, typically seen on charts, occurs when trading activity skips sequential price points, usually driven by intense investor interest. In other words, there was no trading, defined as an exchange of ownership in security, between the price point where the runaway gap began and where it ended.
& Exhaustion Gaps
An exhaustion gap is a technical signal marked by a break lower in prices (usually on a daily chart) that occurs after a rapid rise in a stock's price over several weeks prior. This signal reflects a significant shift from buying to selling activity that usually coincides with falling demand for a stock. The implication of the signal is that an upward trend may be about to end soon.
Gaps are easy to spot, but determining the type of gap is much harder to figure out.
Source: Investopedia.com
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