Technical Analysis - Gap and Gaps

Discussion in 'Technical Analysis' started by bhavana, Mar 3, 2005.

  1. bhavana

    bhavana Guest

    Dear Traderji,
    I am learning tech. analysis.
    Please explain Gap.
    Gap types and its significanse
     
  2. Traderji

    Traderji Super Moderator

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    Re: Gap---Traderji please explain

    What is a Gap

    When the price of a stock moves very sharply up or down with no trading in between there is a "hole" in the chart -- a space or a vacuum that is empty, at least temporarily, of price action. That space is called a GAP

    Alternatively a gap is an area on a price chart in which there were no trades.

    Gaps normally occurs after the close of the market on one day and the next day's open.

    Lot 's of things can cause a GAP, such as an earnings report coming out after the stock market had closed for the day. If the earnings were significantly higher than expected, many investors might place buy orders for the next day. This could result in the price opening higher than the previous day's close. If the trading that day continues to trade above that point, a gap will exist in the price chart. Gaps can offer evidence that something important has happened to the fundamentals or the psychology of the crowd that accompanies this market movement. Below is a chart showing a gap so you will know what we are talking about.
     

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  3. sudoku1

    sudoku1 Well-Known Member

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