Gap Patterns

Gap patterns occur when price opens significantly higher or lower than the previous close, creating a visible gap on the chart. Gaps reveal extreme sentiment shifts, often driven by overnight news, earnings, or macroeconomic events. Understanding gap types — breakaway, runaway, exhaustion, and common gaps — is critical for trading the open and managing overnight positions. Gap patterns provide some of the highest-probability trading setups when combined with volume analysis and support/resistance levels.