When traders saw a breakaway gap, there will be questions in their mind:
1) Will the stock begin a new price trend?
2) Will an exhaustion gap signal the party is over faster
than champagne left uncorked?
Gap Up
Accordia Golf Trust chart have 3 gap up and the share price are likely to remain at the gap up level. At the 2nd gap up, you can see the share price trying to cover back to the original price before the gap up. Finally it had the 3rd gap up and price start to move sideways again.
Gap up happen when there are good things happening to the company. For e.g. Accordia Golf got a take over offer or a company was successful in creating a COVID-19 vaccine that is going to boost the company profits etc.
Gap Down
On 27 May 2020, there was a gap down on SGX and the share price had stay below the gap down price ever since.
Gap down happen when there are bad things happening to the company. For e.g. SGX lost it MSCI contract license or a company sales was badly affected by COVID-19 shutdown etc.
Conclusion
Breakaway identifies the start of a new trend and occurs on breakout from a consolidation region. It is accompanied by high volume on the day of the gap and continuing for several days. The change of trend continues long enough for several new highs (uptrends) or new lows (downtrends) to occur after the gap.
Gaps are great signal for a trend change as they signified a change of fundamental of the company and it will pays you greatly when you pay attention and tag along in the direction of the change of trend.
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