Up Gap

Definition:

An Up Gap is an immediate price change from a low price to a high price that is reflected in a chart as an area where no trades took place between the close of the previous bar and open of the subsequent bar.

Background:

Gaps can be created by a variety of factors including, but not limited to, specialist behavior, earnings announcements and analyst ratings.

Up Gaps often fill due to profit taking from buyers who have open positions before the Gap and sell as price moves up.

Practical Use:

For traders, Gaps represent both opportunity and risk. Technical analysts should strive to understand Gap strategies in which to profit from as well as reduce risk in trades.