Description
Breakaway gaps are interesting. It happens when the share price broke out of the channel. To understand this kind of gap, one must understand the concept of congestion areas. Congestion area is a price range, within which share price is moving for longer period of time (even for several weeks). Congestion area is bordered by the support and resistance lines. To break out of the area, the market needs to be active. An upward breakout means more buyers and less sellers, a downward breakout means more sellers and less buyers.
- Role: Neutral
- Expected trend: Neutral
- Previous tren: Neutral
- Reliability: Low
- Pattern: Gap
Breakaway Gap Example
Trading volume increases suddenly, the closing of the opposite positions helps the development of gaps. The breakaway point can be the start of a new trend. A support (upward breakout) or a resistance line (downward breakout). If the market does not fill the gap, the gap can mean the beginning of a new progress (increase/decrease). A breakaway gap should be a gap breaking out of a pattern. For example, when share price breaks out of an ascending triangle with a gap, the signal is more reliable.
