Gap Down
A gap down occurs when a stock opens below the prior session's low, leaving a price range where no trading occurred. Gaps down typically follow disappointing earnings, guidance cuts or downgrades, a repricing that happened outside market hours.
- Bias
- Bearish
- Category
- Short Setups
- Scan cadence
- Every close
What has to be true for a Gap Down to trigger
- The open below the previous session's low
- The gap of meaningful size relative to the stock's normal range
- The gap holding rather than filling immediately
How PatternGrade grades it
A larger gap relative to the stock's typical range, on heavier volume, and holding its losses through the session, grades higher.
Every scanner grades its hits A+, A or B from the pattern's own measurable structure. The grading is deterministic — the same chart always produces the same grade. It describes how closely the chart matches the pattern, not how likely anything is to happen; no hit rate or probability is attached to a grade. The reasoning is set out in the methodology.
What a Gap Down looks like in practice
A stock closes at $61.20 and opens the next morning at $53.80 after a guidance cut, below the prior session's low of $60.40, so the entire $53.80-$60.40 zone has no trading in it. Volume runs seven times average, the stock spends the day beneath its opening range, and closes at $52.90 near the low rather than recovering toward the gap.
How a Gap Down fails
The gap fills and price recovers. Gap-downs on news that the market ultimately shrugs off get bought back, sometimes within days, and a short taken on the open can be squeezed hard. The tell is the same as for gap-ups, inverted: a stock that gaps down and then spends the session climbing off its lows is being accumulated, and that is a very different event from one that closes at the bottom.
What this pattern is telling you
Gaps are news-driven. By the time one appears the information is public, and gap-downs frequently see sharp reversals within the session.
PatternGrade is not a financial advisor and does not give buy or sell recommendations. Targets and stops shown on a pattern are reference levels derived from its geometry, not advice.
How to scan for Gap Down setups
PatternGrade rescans every liquid US stock (~4,500 names) for this pattern after every close and returns the hits as a graded list, with the pattern drawn on each chart, so you review setups rather than hunt for them.
Join the waitlist to be invited when sign-ups reopen and see the current Gap Down list, or browse all 75 patterns.
Gap Down FAQ
What causes a stock to gap down?
Almost always news released outside market hours, such as an earnings miss, lowered guidance, a downgrade or a corporate event, repricing the stock before the open.
Do gap downs always fill?
No. The folklore is stated far more confidently than the evidence supports. Small gaps without fundamental news behind them fill often; breakaway gaps on genuine bad news can stay open for years. Treating 'gaps always fill' as a rule is a reliable way to fight a trend.
What makes a gap down significant?
Volume, the reason behind it, and where it occurs. A gap out of a long topping range on heavy volume after real news differs entirely from a gap in an already beaten-down stock on ordinary volume. PatternGrade grades size relative to the stock's own range, volume, and structural position.
Should the stock hold below its opening range?
It is one of the more useful same-day tells. A stock that gaps down and stays beneath its opening range is being distributed; one that gaps down and rallies all day is being bought. PatternGrade is end-of-day, so it sees where the close landed relative to the gap.
How large does a gap need to be?
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 one that routinely swings 8% is noise.
Patterns a Gap Down is mistaken for
- Bearish Breakaway Gap
- A bearish breakaway gap specifically exits a defined consolidation. A gap down can occur anywhere, including mid-trend.
- Gap Up
- The mirror: an open above the prior session's high.
- Bearish Island Reversal
- An island requires a gap up followed later by a gap down, stranding bars above. A gap down is a single event.
- Distribution Day
- A distribution day needs no gap, only a decline on heavier volume. Gap-downs usually qualify as distribution days too.
Last reviewed . Structure and grading for the Gap Down are reviewed against the scanner's own rules.