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

Other Gaps

The final category for gaps does not really have a name, but has been called a “common” or “unclassified” gap. These types of gaps occur within price patterns or congestion zones and are the least meaningful of all gaps. They generally signify a lack of direction in the market or lack of conviction of the market participants. News and sentiment affect these markets more than others simply because they are less liquid at that time.

Although this chapter has focused on daily charts, gap analysis is valid for all time frames such as five minute and hourly. As markets trade closer to 24 hours, gaps become less likely. Overnight news has less chance to create them as trading is possible before, during and after news events that previously ...