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Technical Analysis of Gaps: Identifying Profitable Gaps for Trading by Richard J. Bauer, Julie R. Dahlquist

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Chapter 1. What Are Gaps?

Gaps have attracted the attention of market technicians since the earliest days of stock charting. A gap occurs when a security’s price jumps between two trading periods, skipping over certain prices. A gap creates a hole, or a void, on a price chart.

Because technical analysis has traditionally been an extremely visual practice, it is easy to understand why early technicians noticed gaps. Gaps are visually conspicuous on a price chart. Consider, for example, the stock chart for Huntington Bancshares (HBAN) in Figure 1.1. A quick glance at the price activity reveals four gaps.

Image

Created with TradeStation

Figure 1.1. Gaps ...

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