4 gap patterns
Gap setups: gap ups, breakaway gaps, gap fill reversals and island reversals, and what an untraded price range tells you.
What gap patterns have in common
A gap is a range in which no trading occurred: the stock opened beyond the previous session's extreme and every price in between was skipped. Gaps mark repricing, usually around news, and the interesting question is never that one happened but where it happened. A gap out of a long quiet base means something different from a gap in an already extended stock, and the same size gap can be a beginning or an end depending on what preceded it.
- Each is defined by an untraded price range between one session's close and the next one's open
- Position in the larger structure is what distinguishes breakaway, runaway and exhaustion gaps
- Volume is the primary evidence that a gap reflects genuine repricing rather than a thin open
- Where the session closes relative to its own opening range is the clearest same-day tell
What these patterns are telling you
The belief that all gaps eventually fill is stated far more confidently than the evidence supports. Small gaps without news behind them fill often; breakaway gaps on genuine developments can stay open for years. Treating gap-fill as a rule rather than a tendency is a reliable way to end up fighting a trend, and it is the single most common error applied to this family.
PatternGrade grades what it finds and publishes how each grade has performed. It is not a financial advisor and does not give buy or sell recommendations.
Every gap pattern PatternGrade scans
Rescanned across ~4,500 US stocks end-of-day, after every close.
Gap UpA session opening above the previous day's high, leaving an unfilled gap. PatternGrade lists gap ups across every liquid US stock after each close.
Gap Fill ReversalPrice returning to close a previous gap and reversing from it. Scanned after every close across every liquid US stock.
Breakaway GapA gap that breaks a stock out of a base or range, typically on heavy volume. PatternGrade scans every liquid US stock for breakaway gaps.
Island ReversalA cluster of sessions isolated by gaps on both sides: a sharp sentiment reversal. Scanned across every liquid US stock after each close.
Gap patterns FAQ
Do all gaps get filled?
No. Many do, particularly small ones and those without fundamental news, but breakaway gaps on real developments frequently go unfilled indefinitely. The useful version of the observation is that gaps created by noise tend to fill and gaps created by repricing tend not to.
What is the difference between a breakaway and an exhaustion gap?
Where it occurs. A breakaway gap carries price out of a consolidation and starts a move; an exhaustion gap comes at the end of an extended run and marks its finish. On the day it happens the distinction is genuinely ambiguous, which is why PatternGrade weights the prior consolidation and the trend leading into the gap.
How big does a gap have to be to matter?
Large relative to the stock's own typical range rather than any fixed percentage. A 2% gap on a stock that normally moves 1% a day is significant; the same gap on a stock that routinely swings 8% is ordinary noise.
What is an island reversal?
A cluster of sessions isolated from the surrounding price action by a gap on each side pointing in opposite directions, leaving those bars stranded. They are rare when defined strictly, and loosening the gap criteria to find more of them destroys what makes the pattern meaningful.
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