Breakout Gap

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Post on 26-May-2015



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DESCRIPTION Breakout Gap Using Candlestick patterns as a guide, traders can identify and profit from trading a breakout gap in a stock. In general terms a breakout gap is a discontinuous pattern in stock charting.


  • 1. Breakout Gap

2. Using Candlestick patterns asa guide, traders can identifyand profit from trading abreakout gap in a 3. In general terms a breakoutgap is a discontinuous pattern in stock charting. 4. It occurs when the prices ofstocks break out from anarrow or congested range 5. Typically the high stock pricefor the day and the low stockprice for the day movegradually up and down day byday. 6. A break out gap will be whenthe stock price seems to jumpout of the daily pattern, eitherup or down, out ofconsolidation pattern. 7. The common experiencewhen a breakout gap occurs is that the stock will move uprapidly and substantially. 8. Those who learn to readCandlestick patternformations will be able toidentify that pattern and will typically be able to trade 9. To learn both Candlestick analysis and specific tradingpatterns an excellent idea is totake an online basic stock market training class coupledwith the Candlestick forum boot camp online. 10. There are several types of gaps including runaway gaps,exhaustion gaps, and commongaps, as well as breakout gaps. 11. In each case stock prices movequickly from a relativelycontinuous progression up,down, or sideways to a discontinuous jump up ordown. 12. In each case the price jumps leave gaps on stock 13. Those interested only in longterm investing can really dislike gaps, unless theinvestor also is astute in technical analysis of stocks using Candlestick chart 14. Although the long terminvestor will not buy stock andsell stock frequently he or shewill be pleased to pick up astock just before it goes upsubstantially in price. 15. The trader, who routinely uses Candlestick chartingtechniques, will see a breakout gap and realize thathe or she may just be in trader heaven and ready to make anice profit. 16. Identification of a breakout gap not only helps stock traders but will be useful tostock options traders as 17. An options trader whoindentifies a breakout gap andreliably predicts a rise in stock price in a timely manner may be able to profit from buying calls on the stock in question. 18. The difference in buying calloptions instead of the stock is that the trader will hold theoption but not the obligationto buy. 19. If the stock goes up in price as anticipated the trader willexercise the option for aprofit. 20. If the stock does not go up in price or goes down then thetrader will only lose the price of the premium paid for theoption. 21. In general, the more rare theoccurrence of this kind of gapthe more reliable it is. 22. For example, in a volatile stockmarket, daily gaps in stock price charting may be rathercommon. 23. These, daily, gaps are lesspredictive than gaps that occur over a week. 24. More so, gaps over a month,or a year can be substantiallymore predictive of large andrapid price 25. Thus the trader who is astutein reading a breakout gap may be able to profit substantiallyfrom the timely purchase of the stock in question.