Breakout Gap

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www.CandlestickForums.com 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.

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  • 1. Breakout Gap Bywww.CandlestickForums.com

2. Using Candlestick patterns asa guide, traders can identifyand profit from trading abreakout gap in a stock.www.CandlestickForums.com 3. In general terms a breakoutgap is a discontinuous pattern in stock charting. www.CandlestickForums.com 4. It occurs when the prices ofstocks break out from anarrow or congested range oftrading.www.CandlestickForums.com 5. Typically the high stock pricefor the day and the low stockprice for the day movegradually up and down day byday. www.CandlestickForums.com 6. A break out gap will be whenthe stock price seems to jumpout of the daily pattern, eitherup or down, out ofconsolidation pattern. www.CandlestickForums.com 7. The common experiencewhen a breakout gap occurs is that the stock will move uprapidly and substantially. www.CandlestickForums.com 8. Those who learn to readCandlestick patternformations will be able toidentify that pattern and will typically be able to trade profitably.www.CandlestickForums.com 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. www.CandlestickForums.com 10. There are several types of gaps including runaway gaps,exhaustion gaps, and commongaps, as well as breakout gaps. www.CandlestickForums.com 11. In each case stock prices movequickly from a relativelycontinuous progression up,down, or sideways to a discontinuous jump up ordown. www.CandlestickForums.com 12. In each case the price jumps leave gaps on stock charts.www.CandlestickForums.com 13. Those interested only in longterm investing can really dislike gaps, unless theinvestor also is astute in technical analysis of stocks using Candlestick chart analysis.www.CandlestickForums.com 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. www.CandlestickForums.com 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. www.CandlestickForums.com 16. Identification of a breakout gap not only helps stock traders but will be useful tostock options traders as well.www.CandlestickForums.com 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. www.CandlestickForums.com 18. The difference in buying calloptions instead of the stock is that the trader will hold theoption but not the obligationto buy. www.CandlestickForums.com 19. If the stock goes up in price as anticipated the trader willexercise the option for aprofit. www.CandlestickForums.com 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. www.CandlestickForums.com 21. In general, the more rare theoccurrence of this kind of gapthe more reliable it is. www.CandlestickForums.com 22. For example, in a volatile stockmarket, daily gaps in stock price charting may be rathercommon. www.CandlestickForums.com 23. These, daily, gaps are lesspredictive than gaps that occur over a week. www.CandlestickForums.com 24. More so, gaps over a month,or a year can be substantiallymore predictive of large andrapid price moves.www.CandlestickForums.com 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. www.CandlestickForums.com