Trading Exhaustion Gaps
The final characteristic of an exhaustion gap is that there is high trading volume taking place on the day of the gap.
Trading exhaustion gaps. This will be unusually high sometimes in the range of 5 10 times or more than average. There are two concepts that go into the term exhaustion gap. Trading an exhaustion gap.
Hence it is a great basis for trading a reversal. However in the exhaustion gap trading strategy the safe stop loss level is the extreme low. We see the stock close at 67 5 on friday but open at 70 on monday on trading volumes more than twice the average a typical sign of an.
The stock has been in an established uptrend over the past few months and weeks. A gap that occurs after the rapid rise in a stock s price begins to tail off. Prices drop and a significant change in trend occurs.
An exhaustion gap is a critical concept to understand when trading stocks at the market open. The exhaustion gap resembles most other gaps in the morning but what makes the gap special is the swiftness of the reversal. The breakaway gap means breaking the important support or resistance or significant trend line in the form of the gap.
Gaps are divided based on the context in which they appear. An exhaustion gap is a form of trading gap a trading gap typically occurs when price opens well above or below the last close enough to create a gap between both prices. Breakaway or breakout gaps.
The exhaustion gap is distinctive because it gaps further with higher volume. Runaway or measuring gaps. An exhaustion gap usually reflects falling demand for a particular stock.
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