A Technical Approach To Trend Analysis: Practical Trade Timing for Enhanced Profits

Gaps as Part of Other Signals

Gaps might be located free of other signals, and when these occur as breakaway, runaway, or exhaustion signals, they are powerful initial indicators. Once confirmed, confidence in the expected outcome will be quite high. However, gaps do not always exist on their own, but may be parts of other signals as well. Some examples include the following:

• The engulfing pattern is one of the strongest of two-session candlesticks. It always gets set up with a hidden gap between the two sessions, with the opening price of the second session lower (bullish) or higher (bearish) than the previous day’s close.

• A harami is the opposite of an engulfing, with a long session followed by a shorter one. It too contains a hidden gap ...