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Breakaway Gap

AnalyticsTrade Team
AnalyticsTrade Team Last updated on 26 Apr 2023

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Breakaway Gap

A breakaway gap is a type of price gap that occurs on a stock chart when the price of a security jumps significantly higher or lower than the previous day’s close. This type of gap is usually caused by a sudden surge in buying or selling pressure, and it often signals the start of a new trend. Breakaway gaps are considered to be one of the most reliable technical indicators, as they often lead to a sustained price move in the direction of the gap.

History of Breakaway Gaps

Breakaway gaps were first identified by Charles Dow, the founder of Dow Theory. Dow Theory is a set of principles that are used to analyze stock market trends and predict future price movements. According to Dow Theory, breakaway gaps are a sign of a new trend, and they often lead to a sustained price move in the direction of the gap. This type of gap is also known as a runaway gap or a break-out gap.

Comparison Table

Type of Gap Description
Breakaway Gap A gap that occurs when the price of a security jumps significantly higher or lower than the previous day’s close.
Common Gap A gap that occurs when the price of a security moves within the range of the previous day’s trading.
Exhaustion Gap A gap that occurs when the price of a security moves outside the range of the previous day’s trading.

Summary

A breakaway gap is a type of price gap that occurs on a stock chart when the price of a security jumps significantly higher or lower than the previous day’s close. This type of gap is usually caused by a sudden surge in buying or selling pressure, and it often signals the start of a new trend. Breakaway gaps are considered to be one of the most reliable technical indicators, as they often lead to a sustained price move in the direction of the gap. For more information about breakaway gaps, you can visit Investopedia, The Balance, and other financial websites.

See Also

  • Common Gap
  • Exhaustion Gap
  • Gap Trading
  • Island Reversal
  • Price Action
  • Price Gap
  • Price Reversal
  • Runaway Gap
  • Trend Reversal
  • Volume Gap

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