Technical Analysis Plain and Simple: Charting the Markets in Your Language, Second Edition

Continuation Gaps

Once a rally or decline is underway, the market pauses and retraces as participants again position themselves. These sorts of patterns are to be expected, but sometimes market opinion is so strong that there is no time for normal profit taking and last chances to establish a position (long or short, depending on the market). When the majority of participants think that a market will continue its move, the market can simply jump to those new prices immediately, and this is known as a continuation gap. Because these types of gaps typically occur at the halfway point of a move, they are sometimes called measuring gaps. Continuation gaps can occur alone, as a series of gaps, or not at all.