AI
Sunday, November 25, 2007 7:20:20 AM
Stock Trading Tip: The Breakaway Gap
A Gap Open occurs when a stock opens at a significantly different price than it closed at on the previous trading day---creating a "gap" on the chart. Most stock traders understand what a gap is, but very few understand what a gap might mean.
One of the easiest (and most profitable) gaps is called the breakaway gap. This type of gap usually occurs after the stock has been in a tight consolidation pattern or trading range:
From the chart above, you can sell that GOOG moved in a trading range for quite some time before its breakaway gap up above 220. Following the breakaway gap, GOOG has run from 220 up to 373, and we still wouldn't bet against Google from here.
Breakaway gaps are usually a key sign that the stock is ready to make a significant move higher, having broke out of its trading range and ready for a nice uptrend run.
A Gap Open occurs when a stock opens at a significantly different price than it closed at on the previous trading day---creating a "gap" on the chart. Most stock traders understand what a gap is, but very few understand what a gap might mean.
One of the easiest (and most profitable) gaps is called the breakaway gap. This type of gap usually occurs after the stock has been in a tight consolidation pattern or trading range:
From the chart above, you can sell that GOOG moved in a trading range for quite some time before its breakaway gap up above 220. Following the breakaway gap, GOOG has run from 220 up to 373, and we still wouldn't bet against Google from here.
Breakaway gaps are usually a key sign that the stock is ready to make a significant move higher, having broke out of its trading range and ready for a nice uptrend run.
