breakout gap

Breakout Gap

Bywww.CandlestickForums.com

http://www.candlestickforums.com/

Using Candlestick patterns as a guide, traders can identify

and profit from trading a breakout gap in a stock.

www.CandlestickForums.com


In general terms a breakout gap is a discontinuous pattern

in stock charting.



It occurs when the prices of stocks break out from a

narrow or congested range of trading.



Typically the high stock price for the day and the low stock

price for the day move gradually up and down day by

day.



A break out gap will be when the stock price seems to jump out of the daily pattern, either

up or down, out of consolidation pattern.



The common experience when a breakout gap occurs is

that the stock will move up rapidly and substantially.



Those who learn to read Candlestick pattern

formations will be able to identify that pattern and will

typically be able to trade profitably.



To learn both Candlestick analysis and specific trading

patterns an excellent idea is to take an online basic stock

market training class coupled with the Candlestick forum

boot camp online.www.CandlestickForums.com


There are several types of gaps including runaway gaps,

exhaustion gaps, and common gaps, as well as breakout gaps.



In each case stock prices move quickly from a relatively

continuous progression up, down, or sideways to a

discontinuous jump up or down.



In each case the price jumps leave gaps on stock charts.



Those interested only in long term investing can really dislike gaps, unless the

investor also is astute in technical analysis of stocks

using Candlestick chart analysis.



Although the long term investor will not buy stock and sell stock frequently he or she

will be pleased to pick up a stock just before it goes up

substantially in price.



The trader, who routinely uses Candlestick charting

techniques, will see a breakout gap and realize that

he or she may just be in trader heaven and ready to make a

nice profit.www.CandlestickForums.com


Identification of a breakout gap not only helps stock

traders but will be useful to stock options traders as well.



An options trader who indentifies a breakout gap and reliably predicts a rise in stock price in a timely manner may be able to profit from buying

calls on the stock in question.



The difference in buying call options instead of the stock is that the trader will hold the

option but not the obligation to buy.



If the stock goes up in price as anticipated the trader will exercise the option for a

profit.



If the stock does not go up in price or goes down then the trader will only lose the price of the premium paid for the

option.



In general, the more rare the occurrence of this kind of gap

the more reliable it is.



For example, in a volatile stock market, daily gaps in stock

price charting may be rather common.



These, daily, gaps are less predictive than gaps that

occur over a week.



More so, gaps over a month, or a year can be substantially more predictive of large and

rapid price moves.



Thus the trader who is astute in reading a breakout gap may be able to profit substantially from the timely purchase of

the stock in question.



breakout gap

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