Breaking gaps

A Breaking gap is a type of stock market that, when produced, exceeds a resistance or support .Breaking gaps are named because what they do when they occur is breaking a support or resistance. They are usually triggers of chartist figures such as a stock market triangle , a shoulder head shoulder or a stock market flag .

For many operators and analysts these gaps are very important in the analysis and its operations. They give a lot of information about the investor sentiment and are a sign that gives confidence to chartist figures.

Characteristics of a Breaking Gaps

The characteristics that define a rupture gap and that differentiates it from the rest of the gaps are the following:

  • They do not close completely, at least in the short term.
  • They are usually hollows of relatively large size.
  • They always exceed a support or resistance.

Trading with break holes

Breaking gaps are widely used in trading . As we have said, they indicate strength in the movement or confidence in a chartist figure. Therefore, operating in favor of these types of holes is a common practice among many traders .

Although there are no types of rupture holes, we will give different examples that show how we can find this type of stock market.

·         Triple roof

The price strongly breaks the support that forms the triple roof. Subsequently it slows down and continues downwards, fulfilling the objective of the triple roof. In this case, taking a short position would have been a very profitable option. Of course, without prejudice to the above, we must wait for the end of the day when the hole is produced to verify that it does not close and confirm the pattern. See triple roof

·         Stock wedge

Again we should wait until the daily candle ends to confirm one of the main features of this type of holes (they do not close). This type of hole is usually common in wedges. Stock wedges tend to break violently in the opposite direction to their movement. See stock wedge

·         Stock correction

In the latter case we have a simple correction of the stock market trend. As you can see the trend of the asset is quite strong without just corrections. After the correction a maximum is formed indicating a resistance (red line). After the correction the price breaks the resistance with a rupture gap to continue rising.

by Abdullah Sam
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