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What is a Stock Market Gap

Price Gaps

Price Gaps is Technical Analysis


A price gap evolves when a stock opens at a higher price than it closed. Post and pre-market activity are no importance for defining gaps. Gaps are usually the outcome of news or any other radical information realized. Gaps are also common phenomenon to low volume activity stocks.There are three main types of gaps:

1) A breakaway gap, which is formed at the beginning of a trend

2) A runaway gap, which is formed during the middle of a trend

3) An exhaustion gap, which is formed close to the end of a trend

The Price Gap

Gap price movements can be traced on bar charts and candlestick charts -but not on basic line and point and figure charts.


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Fibonacci numbers and Technical Analysis


0.618 is the Golden Ratio deriving from Fibonacci SequenceFibonacci numbers were introduced by the Italian Leonardo Fibonacci in the early 1200. In the Fibonacci sequence of numbers each number equals the sum of the previous two numbers. Here are the first numbers of the sequence: 1,2,3,5,8,13,21,34,55,89,144,233,377,610,987 etc.
In addition any given number of the Fibonacci sequence equals 1.618 times the previous number and 0.618 of the next number.

The Golden Ratio

The number 0.618 mentioned before is commonly known as the Golden Ratio. There are two other important ratios for technical analysis which derive from the Fibonacci sequence: 0.382 and 0.5.


How Fibonacci numbers are used in Technical Analysis

Fibonacci numbers are used in Technical Analysis to determine price support and resistance levels.

1) a 38.2% retracement usually indicates a prior trend will continue,

2) a 50% retracement indicates that a prior trend is possible to continue,

3) a 61.8% retracement indicates the origin of a new prior trend.


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