What Is a Common Gap?

A common gap is a price gap found on a price chart for an asset. These occasional gaps are brought about by normal market forces and, as the name implies, are very common. They are represented graphically by a non-linear jump or 😼drop from one point on the chart to another point.

Understanding Common Gaps

In general, there is no major event that precedes this type of gap. Common gaps generally get filled relatively quickly (usually within a couple of days) when compared to other types of gaps. Common gaps are also known as "area gaps" or "trading gaps" and tend to be accompanied by normal average trading volume.

Because common gaps are relatively small, normal, and somewhat regular events in the price action of an asset, they tend to provide no real analytical insight. These gaps are observed frequently in assets that experience a break from one day's market close to the next day's open and may be exaggerated by events that occur between Friday and Monday trading over a weekend.

Common gaps are typically what market 澳洲幸运5开奖号码历史查询:technicians refer to as filled gaps. This refers to when the price from a gap reverts back to where the gap initially began, where the empty space has thus been considered t𒁏o be filled. For instance, if shares of XYZ stock close at $35.00 on Monday, and then XYZ opens the next day at $35.10, the Tuesday intraday price will tend to include the $35 price level.ꦚ

Common Gaps vs. Other Types of Gaps

By contrast, a 澳洲幸运5开奖号码历史查询:breakaway gap shows decisive movement out of a range or other chart pattern. A breakaway gap can be seen when the price moves sharply through a 澳洲幸运5开奖号码历史查询:support or resistance level established by a 澳洲幸运5开奖号码历史查询:trading range. A breakaway gap may also accompany a technical chart pattern, such as a wedge, 澳洲幸运5开奖号码历史查询:rounded bottom, or head and shoulders.

Breakaway gaps are also typically associated with confirming a new trend. For example, the prior trend may have been down, and the price then forms a large cup and handle pattern and💮 then has a breakaway gap to the upside above the handle.

This would help confirm 🃏that the downtrend is over and the uptrend is underway. The breakaway gap, which shows strong conviction on the part of the buyers, in this case, is a piece of evidence tꦛhat points to further upside in addition to the chart pattern breakout.

A breakaway gap with larger-than-average volume, or especially high volume, shows strong conviction in the gap direction🅘. A volume increase on a breakout gap helps confirm tha𒊎t the price is likely to continue in the breakout direction.

If the volume is low on a breakaway gap there is a greater chance of failure. A 澳洲幸运5开奖号码历史查询:failed breakout occurs when the price gaps above resistance or below support but can't sustain the price and move back into the prior tr𒆙ading range.

The Bottom Line

Traders using technical analysis will study charts to make their buy⛎ and sell decisions. When there are gaps between one point in a chart to another, this is a common gap, which occurs often due to normal market movements. Common gaps are not useful in any particular way and do not provide any buy or sell signal to a trader.