Gap Up & Gap Down -- Stock Tracker

Patterns

Gap Up & Gap Down

A gap occurs when a stock opens significantly higher or lower than its previous close, leaving an empty space on the chart. Gaps often happen after earnings or major news, and their behavior afterward follows identifiable patterns.

Types of gaps

Breakaway gap: stock gaps out of a base on high volume -- continuation likely.
  Exhaustion gap: stock gaps after a long move -- trend may be ending.
  Earnings gap: price jumps on earnings results -- most common in this app.
  Common gap: fills quickly; usually not significant.

Gap fill

Over 70% of gaps eventually 'fill' -- price returns to the pre-gap level.
Earnings gaps down: painful but often partially fill over 1-4 weeks.
Earnings gaps up: strong gaps on great guidance often don't fill for months.
Institutional traders often buy gap-fills as low-risk entries.

✓ Quick Tips

Never chase a gap-up open -- wait for the first 30 min to see if it holds.
Gap-downs on earnings with guidance cuts are more dangerous than pure misses.
A stock that gaps up and keeps climbing through the day is very strong.
Gaps on no news are more suspicious -- check for insider trades.

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