what is a stock gap 
a stock gap is an area discontinuity in a security s chart where its price either rises or falls from the previous day s close with no trading occurring in between gaps are common when news causes market fundamentals to change during hours when markets are typically closed for instance an earnings call after hours understanding a stock gapgaps typically occur when a piece of news or an event causes a flood of buyers or sellers into the security it results in the price opening significantly higher or lower than the previous day s closing price depending on the kind of gap it could indicate either the start of a new trend or a reversal of a previous trend gapping occurs when the price of a security or asset opens well above or below the previous day s close with no trading activity in between partial gapping occurs when the opening price is higher or lower than the previous day s close but within the previous day s price range full gapping occurs when the opening is outside of the previous day s range gapping especially a full gap shows a strong shift in sentiment that occurred overnight some traders make it a strategy to profit from playing the gap when such a situation occurs there are limitations despite gaps being easy to spot the glaring flaw is one s own ability to identify the different types of gaps that occur if a gap is misinterpreted it could be a disastrous mistake causing one to miss an opportunity to either buy or sell a security which could weigh heavily on one s profits and losses types of stock gapsthere are some fundamental differences between the different types of gaps common gaps breakaway gaps runaway gaps and exhaustion gaps each type of gap has certain consequences for traders for example reversal or breakaway gaps are typically accompanied by a sharp rise in trading volume while common and runaway gaps are not additionally most gaps occur due to news or an event such as earnings or an analyst s upgrade downgrade common gaps happen more regularly and do not always need a reason to occur also common gaps tend to get filled whereas other gaps may signal a reversal or continuation of a trend examples of a stock gapin the example below of amazon com inc amzn a small stock gap occurred between oct 26 2023 and oct 27 2023 when the price jumped from 119 57 to 127 74 this was a reversal of a downward trend which saw the stock s price continue to climb 1in the next example of alphabet inc googl a gap can be seen from oct 24 2023 to oct 25 2023 when the price fell from 138 81 to 125 61 after weeks of a general price increase the gap drop did not result in a continued downward trend instead the price continued to increase to its pre gap level filling the gap 2