Exhaustion Gaps
The exhaustion gap signals that the current trend or price pattern has lost momentum and is likely to reverse soon. This pattern is seen repeatedly in charts. As a general rule, exhaustion gaps that show up at the end of a strong trend tend to lead to strong reversals, and the larger the gap, the more likely the reversal will occur soon in a filling action.
Figure 10.10 contains four examples of exhaustion gaps. This chart is similar to the chart in Figure 10.9 in overall shape and price pattern; however, the exhaustion gaps clearly define turning points in secondary trends.
Figure 10.10 Exhaustion gaps (Chart courtesy of
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