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Breakout Gap
Using Candlestick patterns as a guide, traders can identify and profit from trading a breakout gap in a stock.
In general terms a breakout gap is a discontinuous pattern in stock charting.
2. Using Candlestick patterns as
a guide, traders can identify
and profit from trading a
breakout gap in a stock.
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3. In general terms a breakout
gap is a discontinuous pattern
in stock charting.
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4. It occurs when the prices of
stocks break out from a
narrow or congested range of
trading.
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5. Typically the high stock price
for the day and the low stock
price for the day move
gradually up and down day by
day.
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6. A break out gap will be when
the stock price seems to jump
out of the daily pattern, either
up or down, out of
consolidation pattern.
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7. The common experience
when a breakout gap occurs is
that the stock will move up
rapidly and substantially.
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8. Those who learn to read
Candlestick pattern
formations will be able to
identify that pattern and will
typically be able to trade
profitably.
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9. To learn both Candlestick
analysis and specific trading
patterns an excellent idea is to
take an online basic stock
market training class coupled
with the Candlestick forum
boot camp online.
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10. There are several types of
gaps including runaway gaps,
exhaustion gaps, and common
gaps, as well as breakout gaps.
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11. In each case stock prices move
quickly from a relatively
continuous progression up,
down, or sideways to a
discontinuous jump up or
down.
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12. In each case the price jumps
leave gaps on stock charts.
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13. Those interested only in long
term investing can really
dislike gaps, unless the
investor also is astute in
technical analysis of stocks
using Candlestick chart
analysis.
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14. Although the long term
investor will not buy stock and
sell stock frequently he or she
will be pleased to pick up a
stock just before it goes up
substantially in price.
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15. The trader, who routinely uses
Candlestick charting
techniques, will see a
breakout gap and realize that
he or she may just be in trader
heaven and ready to make a
nice profit.
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16. Identification of a breakout
gap not only helps stock
traders but will be useful to
stock options traders as well.
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17. An options trader who
indentifies a breakout gap and
reliably predicts a rise in stock
price in a timely manner may
be able to profit from buying
calls on the stock in question.
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18. The difference in buying call
options instead of the stock is
that the trader will hold the
option but not the obligation
to buy.
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19. If the stock goes up in price as
anticipated the trader will
exercise the option for a
profit.
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20. If the stock does not go up in
price or goes down then the
trader will only lose the price
of the premium paid for the
option.
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21. In general, the more rare the
occurrence of this kind of gap
the more reliable it is.
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22. For example, in a volatile stock
market, daily gaps in stock
price charting may be rather
common.
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23. These, daily, gaps are less
predictive than gaps that
occur over a week.
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24. More so, gaps over a month,
or a year can be substantially
more predictive of large and
rapid price moves.
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25. Thus the trader who is astute
in reading a breakout gap may
be able to profit substantially
from the timely purchase of
the stock in question.
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