![]() These gaps can be caused by strong institutional demand to buy or sell a security based on things that happened after the trading session closed. When companies release their earnings reports, quarterly performance reports, or there is news or rumors (e.g., mergers, acquisitions, lawsuits, environmental accidents/spills) that will positively or negatively affect the stock’s price, there may be a gap up or down in its price. They form when information, events, traders’ sentiment, or other factors affect the value of the stock. Price gaps form during periods when trading has ceased. It is the reluctance of sellers to sell at the low price that prevents the stock’s market price from further decline in value. It is referred to as a support because below this price sellers are unwilling to sell, but there are buyers willing to buy it. The support level represents the lowest market price of the stock during a period of trading. The resistance level exerts downward pressure on the stock price and is its upper value of the price range. ![]() This level represents the price at which sellers are willing to sell off their securities and the highest price that buyers’ are willing to pay to acquire those assets. The resistance level is the highest price reached by the stock during a period of trading. The price range of a stock is defined by its resistance and support level. Defined Price Range: Resistance and Support Levels FadingĪ term used for price gaps that are filled on the same day that they occur. These gaps are less likely to be filled because they are used to confirm the direction of the current price trend. These gaps will probably be filled because they signal the end of a trend. Finally, when a gap starts to fill, it will continue to do so because there is no resistance or support to stop it. Furthermore, it is not possible to know in advance how long it will take for a price gap to fill. Notably, most of the time, price gaps do not fill in seconds, minutes, hours, or a trading session. The time it takes for the price to fill will vary. Gap FillĪfter a price gap has formed, the stock will move in the direction of the trend and then retrace itself back to the price level at which the price gap formed. The opening price of the stock is lower than the previous day’s closing price, but not lower than the previous day’s lowest trading price. The opening price of the stock is higher than the previous day’s closing price, but not higher than the previous day’s peak trading price. The opening price of the stock is lower than the closing price of the stock at the end of the prior day’s trading session. The opening price of the stock is higher than the closing price of the stock at the end of the prior day’s trading session. There are four kinds of price gaps: full gap up, full gap down, partial gap up, and partial gap down. They can also signal a strong shift in traders’ sentiment. Gaps may indicate the beginning of a new trend, reversal of trend, or even the continuation of the current trend. The trading sessions must be consecutive, and these price gaps develop during the absence of market trading.
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