Technical Analysis Plain and Simple: Charting the Markets in Your Language, Second Edition

Breakaway Gaps

Breakaway gaps (see Figure 11.1) occur at the completion of an organized price pattern and usually signal the start of a significant price move. They are important because they emphasize that there was a breakout, and this becomes an even stronger signal when it occurs with higher volume. Heavy volume breakaway gaps are usually important levels of support and resistance over the longer term as well.

Figure 11.1. CSCE coffee

When market participants are adjusting their activities in a consolidation pattern such as a rectangle, triangle, or head and shoulders, they buy and sell to lock in profits and limit losses within a defined ...