Price gaps usually happen when the trading public realise (wake up) that a price shock has occurred.

A tip here “chasing gaps is a great way to throw away money.”

A gap occurs when todays open share price is higher than yesterday’s closing high This confirms a surge in buying activity.

And vice versa when the open is lower than yesterday’s low price.This confirms a surge in sellig activity.

The bigger the gap the stronger the buying/selling pressure. Gaps are very significant in stocks with a steady volume of sales.

The price gap remains ” Bullish” if two conditions are met.

1.The open is higher than the high price of the previous day and continues to to climb above the open price.

2.The share price does not fall below yeserday’s low.

Of course if the opposite is happening ( bearish) the share price is declining.

Classic gap activity shows a dramatic change in investor sentiment. Stocks with a high number of trades confirm a “Crowd” has gathered and action is devoloping.

Gaps indicate significant changes in a stock valuations. Either up or down.

Gaps also show overnight and weekend volatility.

These gaps always appear after the first 30 minutes in trading.

Personally I am always interested in gaps of more that 3%. These typical rallies usually last only at most 3 to 5 days maximum.

Another tip , “A failed gap on or around day 4 invariably signals it is time to take your profits and run.

All of the above information will help you to better understand how important gaps can be in your daily profitable share trading.

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