![]() ![]() For more information on how support and resistance work, (see: Support & Resistance).Īlso, Gaps are an important part of most Candlestick Charting patterns (see: Candlestick Basics) for a list of candlestick pattern charts and descriptions. Look at the chart below JOB hit a low of. A gap happens when a stock opens lower than the low or higher than the high from the previous day, creating space between the bars on the chart. Gaps are important areas on a chart that can help a technical analysis trader better find areas of support or resistance. Specifically, I will talk about what a gap fill is, why it happens, and show you a chart trading near that level. Notice how gaps down can act as areas of resistance and gaps up can act as areas of support: The chart below of Wal-Mart (WMT) stock shows many instances of gaps up and gaps down. Traders and investors see anything below the gap as an area of no return, after all, there was probably some positive news that sparked the gap up and might still be in play for the company. ![]() The example of eBay (EBAY) above shows the gap acting as support. What is a gap The difference between the closing price and the following days opening price of any market, stock, or other trading instrument. Think of a gap as a hole in the price chart that needs to be filled back in.Īnother occurrence with gaps is that once gaps are filled, the gap tends to reverse direction and continue its way in the direction of the gap (for example, in the chart above of eBay, back upwards). Often after a gap, prices will do what is referred to as “fill the gap”. The chart below of eBay (EBAY) stock shows the gap up acting as support for prices. The same phenomenon can occur with bear gaps, as the underlying equity. If the stock reaches the stop price, the order becomes a market order and is filled at the next available market price. Windows Example – Gaps as Support and Resistance In other words, after forming a bullish gap, a stock may resist filling the gap. Windows Example – Gaps as Support and Resistance. ![]()
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