Amazonas Florestal Ltd (AZFL)

[La Dolce Vita]

$AZFL - Breakaway Gaps Explained

http://stockcharts.com/school/doku.phpid=chart_school:chart_analysis:gaps_and_gap_analysis

"Breakaway gaps are the exciting ones. They occur when the price action is breaking out of a trading range or congestion area. To understand gaps, one has to understand the nature of congestion areas in the market. A congestion area is just a price range in which the market has traded for some period of time, usually a few weeks or so. The area near the top of the congestion area is usually resistance when approached from below. Likewise, the area near the bottom of the congestion area is support when approached from above. To break out of these areas requires market enthusiasm, and either many more buyers than sellers for upside breakouts or many more sellers than buyers for downside breakouts.

Volume will (should) pick up significantly, not only from the increased enthusiasm, but because many are holding positions on the wrong side of the breakout and need to cover or sell them. It is better if the volume does not happen until the gap occurs. This means that the new change in market direction has a chance of continuing. The point of the breakout now becomes the new support (if an upside breakout) or resistance (if a downside breakout). Don't fall into the trap of thinking this type of gap, if associated with good volume, will be filled soon. It might take a long time. Go with the fact that a new trend in the direction of the stock has taken place, and trade accordingly. Notice in the chart below how prices spent over two months without going lower than about 41. When they did, it was with increased volume and a downward breakaway gap."

http://www.investopedia.com/terms/b/breakawaygap.asp