💡 Key Takeaway — A gap up occurs when the opening price jumps above the previous day's high. The key is 'where' it occurred — if it breaks resistance + has volume, it’s real; if there’s no volume, it’s likely to be filled back in.
What is a Gap Up?
A gap up occurs when the opening price of the day is higher than the previous day's high, creating a blank space (gap) on the chart. When buying pressure accumulates due to positive news, earnings surprises, or sector issues before the market opens, it starts with a step jump rather than a continuous rise from the previous day's closing price. This reflects a strong buying intent.
Not All Gaps Are the Same — Types of Gaps
- Breakout Gap — A gap that breaks through a range or resistance. It could signify the start of a new trend (significant)
- Exhaustion Gap — A gap that occurs at the end of a significant rise. It could be the last overheating (risky)
- Common Gap — A gap that is filled without much significance
Therefore, the key is "where did it occur" rather than just "a gap appeared."
A gap that forms while breaking through resistance in a consolidation area is the most meaningful.
Criteria for a True Gap Up — Breakout + Volume
A reliable gap up usually accompanies breakout from resistance + a surge in volume.
A gap that appears without volume is easily filled back in.
Using DawnScan — We look for gap breakouts above resistance rather than simple gap ups. This means we score when it breaks through a range or resistance with a gap, indicating a potential trend reversal.
Risks of Filling the Gap
Gaps tend to fill back in as they are empty spaces.
Especially, gaps without volume or exhaustion gaps at the end of overheating can lead to significant losses if chased at the day's high. Caution is advised when chasing the top of a gap.
Alongside Other Signals
The consolidation just before a gap breakout can be checked with Bollinger Squeeze, the trend after the breakout with ADX, and the scale of volatility with ATR.
For the overall flow, refer to pre-breakout early signal overview and methodology.
Warning — A gap up does not guarantee continued upward movement, and there is a high risk of filling the gap and chasing highs.
All information is for reference only, and investment responsibility lies with the individual.
Check Now
Check today's scan for stocks that have been identified with gap breakouts along with other signals.
Frequently Asked Questions
What is a gap up?
A gap up is a phenomenon where the opening price of the day is higher than the previous day's high, creating a blank space (gap) on the chart. It occurs when buying pressure concentrates before the market opens due to announcements of good news, earnings surprises, or sector issues. Gaps reflect strong buying intent, but their significance can vary greatly depending on the size of the gap and subsequent volume and trend sustainability.
What is the difference between gap_breakout and a simple gap up?
A simple gap up only means that the opening price is high, and the stock price may fill the gap and decline afterward. DawnScan's gap_breakout refers to cases where a gap up is confirmed alongside a breakout of key resistance levels (moving averages, recent highs). In other words, it is only recognized as a signal when the gap acts as an energy force breaking through the upper boundary of a range, increasing sustainability compared to a simple gap up.
What are the criteria for gap_breakout_50 and gap_breakout_20?
gap_breakout_50 refers to a gap up breakout above the 50-day moving average, used as a signal for medium-term trend reversal. The target is set at +15% or more after entry. gap_breakout_20 refers to a gap up breakout above the 20-day moving average, corresponding to short-term momentum plays with a target of +10% or more. A breakout above the 50-day line is considered a stronger trend reversal signal than a breakout above the 20-day line.
Why does gap filling occur?
Gap filling is the phenomenon where the stock price comes back down to fill the gap after it has occurred. The main reasons are ① profit-taking after overinterpreting good news, ② a chain decline along with overall market adjustments, and ③ when the gap up is not supported by volume. To defend against gap filling, it is important to set the gap's lower boundary (previous day's high) as a stop-loss criterion and to check if the volume on the day of the gap occurrence is sufficiently high compared to the average.