Breakaway Gap - Breakaway Gap Stock
The
breakaway gap is a significant development and has strong implications in the
direction of the gap for the stock. Breakaway gaps occur when prices jump
outside of a recent trading range or
consolidation area. This may happen
when a stock opens well above any high made recently or well below any low made
recently, as a result of sudden extreme optimism or pessimism. Breakaway
gaps are not filled quickly, and leave a blank space on the stock chart.
Breakaway gaps often occur as resolutions to common
chart patterns, as traders
identify a pattern and rush to be the first into the trade. Identifying breakaway gaps
properly can lead to very reliable trading signals, particularly when they occur on high volume.
Examples of
Breakaway Gaps:
The example above shows a breakaway gap to
the upside which occurred in this stock prior to a big
uptrend. The
breakaway gap was not filled and price moved swiftly higher.
The example above shows a breakaway gap to
the downside in this stock. At the time of the
stock gap, price jumped below the
multi-month trading range and trended lower with ease.
Be sure to learn more about gaps such as
common gaps,
exhaustion gaps, and
runaway gaps.
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