Gap Up¶
A gap up occurs when a stock's opening price is above the prior session's high, leaving an untraded price void on the chart. It reflects an overnight repricing of supply and demand driven by catalysts such as earnings releases, guidance updates, FDA decisions, or macro data. The gap down is the inverse scenario.
HOW IT WORKS¶
Gap ups are classified into four types from classical technical analysis:
- Common gap — small gap within a consolidation range; typically fills within days and carries little directional significance.
- Breakaway gap — gaps out of a base or chart pattern on heavy volume; signals the start of a new trend and often remains unfilled.
- Runaway (measuring) gap — appears mid-trend; used to project a price target by adding the gap's distance to the original pattern move.
- Exhaustion gap — occurs after an extended move on climactic volume, then reverses; marks a probable trend end.
Gap size is measured as a percentage: (open − prior close) ÷ prior close. A gap above 4% on a large-cap or above 10% on a small-cap is considered significant. A gap and go never trades back to the prior close; a gap and crap fades through it within the first hour. The "all gaps fill" assumption is false — breakaway gaps can remain open for years.
IN TAPEBOARD¶
Tapeboard surfaces gap data at the open so traders can act on the setup immediately:
- Gap scanner — filters pre-market movers by gap percentage, float, and volume relative to average, letting traders isolate high-quality earnings gaps from noise.
- Opening range overlay — plots the first 5, 15, and 30-minute ranges over the gap level; a breakout above the opening range with the prior close holding is the entry trigger for gap-and-go trades.
- Prior close line — permanently displayed on intraday charts as the key reference level; price reclaiming or losing this level determines whether a gap is holding or fading.
- Slippage awareness — Tapeboard order tickets flag positions held through a known catalyst, warning that stop orders will execute at the open rather than the stop price.