Gap up and Gap Down Filling

Hi all,

I am new to the stock market technicals. I heard that gap up openings on the upside or downside will be filled later. Is that technical point true?if so, is there any time limit for this gap to be filled?

Hi Sethuramansid,

Gaps need not be filled. But majority cases, some time later, when the markets discount the factors which caused the gaps in price behavior, they can be filled. First time when the price approaches towards these gaps, the orders are still supposed to be there at Gaps to work as support or resistance depending on the side of gap. And regarding the time limit to fill the gap - there is no proper answer from my side. But one thing is - the early the prices reach the gap, the better the efficacy. But at the same time please look into the volumes at the time of gap and immediately after the gap behavior. This gives a clue over the strength of Gap.

Goodluck!

Happy practicing technicals

ajayakumar

From a purely technical perspective....

Gaps may or may not be filled in a certain time frame. The faster they are filled, the faster they signal reversal of trends in that time frame.

For example, let us say there is gap up on opening followed by a movement to negative territory with-in say a couple of hours. This indicates that there will be a brief correction in the intraday charts - ie say hourly or 2-hrly charts. This has almost no significance to the trend in the daily / weekly charts.

Unfilled gaps indicate strong continuation of prevailing trends. Like in the above example, suppose the gap up was not filled even after a few hours, it signifies that the up trend is going to continue in the intraday charts for quite some time.

Hope this helps.

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