A breakaway gap occurs at the beginning of a market move - usually after the security has traded in a consolidation pattern, which happens when the price is non-trending within a bounded range. It is referred to as a breakaway gap as the gap moves the security out of a non-trending pattern into a trending pattern. The chart of FiatChrysler shows three of these gaps. A strong breakaway gap out of a period of consolidation is considered to be much stronger than a non-gap move out. The gap gives an indication of a large increase in sentiment in the direction of the gap, which will likely last for some time, leading to an extended move. The strength of this gap (and the accuracy of its signal) can be confirmed by the volume during the gap. The greater the volume out of the gap, the more likely the security will continue in the direction of the gap.
Gaps in Price Charts
Daily Analysis - 22/12/2017