S&P 500   4,282.37 (+1.45%)
DOW   33,762.76 (+2.12%)
QQQ   354.65 (+0.75%)
AAPL   180.95 (+0.48%)
MSFT   335.40 (+0.85%)
META   272.61 (+0.00%)
GOOGL   124.67 (+0.77%)
AMZN   124.25 (+1.21%)
TSLA   213.97 (+3.11%)
NVDA   393.27 (-1.11%)
NIO   7.56 (+0.27%)
BABA   84.27 (+1.53%)
AMD   117.86 (-1.35%)
T   15.21 (-3.80%)
F   12.39 (+2.31%)
MU   69.17 (+0.12%)
CGC   0.83 (-1.17%)
GE   105.80 (+1.08%)
DIS   90.77 (+2.46%)
AMC   4.55 (+0.00%)
PFE   38.36 (+0.89%)
PYPL   63.96 (+1.44%)
NFLX   400.47 (-0.66%)
S&P 500   4,282.37 (+1.45%)
DOW   33,762.76 (+2.12%)
QQQ   354.65 (+0.75%)
AAPL   180.95 (+0.48%)
MSFT   335.40 (+0.85%)
META   272.61 (+0.00%)
GOOGL   124.67 (+0.77%)
AMZN   124.25 (+1.21%)
TSLA   213.97 (+3.11%)
NVDA   393.27 (-1.11%)
NIO   7.56 (+0.27%)
BABA   84.27 (+1.53%)
AMD   117.86 (-1.35%)
T   15.21 (-3.80%)
F   12.39 (+2.31%)
MU   69.17 (+0.12%)
CGC   0.83 (-1.17%)
GE   105.80 (+1.08%)
DIS   90.77 (+2.46%)
AMC   4.55 (+0.00%)
PFE   38.36 (+0.89%)
PYPL   63.96 (+1.44%)
NFLX   400.47 (-0.66%)
S&P 500   4,282.37 (+1.45%)
DOW   33,762.76 (+2.12%)
QQQ   354.65 (+0.75%)
AAPL   180.95 (+0.48%)
MSFT   335.40 (+0.85%)
META   272.61 (+0.00%)
GOOGL   124.67 (+0.77%)
AMZN   124.25 (+1.21%)
TSLA   213.97 (+3.11%)
NVDA   393.27 (-1.11%)
NIO   7.56 (+0.27%)
BABA   84.27 (+1.53%)
AMD   117.86 (-1.35%)
T   15.21 (-3.80%)
F   12.39 (+2.31%)
MU   69.17 (+0.12%)
CGC   0.83 (-1.17%)
GE   105.80 (+1.08%)
DIS   90.77 (+2.46%)
AMC   4.55 (+0.00%)
PFE   38.36 (+0.89%)
PYPL   63.96 (+1.44%)
NFLX   400.47 (-0.66%)
S&P 500   4,282.37 (+1.45%)
DOW   33,762.76 (+2.12%)
QQQ   354.65 (+0.75%)
AAPL   180.95 (+0.48%)
MSFT   335.40 (+0.85%)
META   272.61 (+0.00%)
GOOGL   124.67 (+0.77%)
AMZN   124.25 (+1.21%)
TSLA   213.97 (+3.11%)
NVDA   393.27 (-1.11%)
NIO   7.56 (+0.27%)
BABA   84.27 (+1.53%)
AMD   117.86 (-1.35%)
T   15.21 (-3.80%)
F   12.39 (+2.31%)
MU   69.17 (+0.12%)
CGC   0.83 (-1.17%)
GE   105.80 (+1.08%)
DIS   90.77 (+2.46%)
AMC   4.55 (+0.00%)
PFE   38.36 (+0.89%)
PYPL   63.96 (+1.44%)
NFLX   400.47 (-0.66%)

Gap Up Stocks

A gap is a break between prices on a chart that occurs when the price of a stock makes a sharp move up or down with no trading occurring in between. Stocks that "gap up" are companies that open at prices that are significantly higher than their previous closing prices, often due to after-hours news items that positively impact investor perceptions of a company's valuation. More about gap up stocks.

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CompanyGap Up %Opening PricePrevious CloseCurrent PricePrice Change Since OpenDaily VolumeIndicator(s)
Yunji Inc. stock logo
YJ
Yunji
+69.7%$0.36$0.21$0.32-11.1%83.32 millionNews Coverage
Gap Up
High Trading Volume
U Power Limited stock logo
UCAR
U Power
+44.9%$11.00$7.59$9.01-18.1%55.64 millionQuiet Period Expiration
News Coverage
Gap Up
Trading Halted
High Trading Volume
Kaixin Auto Holdings stock logo
KXIN
Kaixin Auto
+39.6%$0.42$0.30$0.35-16.4%14.55 millionGap Up
High Trading Volume
Connect Biopharma Holdings Limited stock logo
CNTB
Connect Biopharma
+29.7%$1.44$1.11$1.22-15.3%18.96 millionNews Coverage
Positive News
Gap Up
High Trading Volume
MongoDB, Inc. stock logo
MDB
MongoDB
+29.5%$380.75$293.96$376.30-1.2%9.12 millionEarnings Report
Analyst Report
Options Volume
News Coverage
Gap Up
High Trading Volume
Digital Ally, Inc. stock logo
DGLY
Digital Ally
+26.9%$5.05$3.98$4.79-5.1%2.51 millionAnalyst Report
News Coverage
Gap Up
High Trading Volume
Yandex stock logo
YNDX
Yandex
+26.4%$23.94$18.94$18.94-20.9%28.27 millionOptions Volume
Gap Up
High Trading Volume
View, Inc. stock logo
VIEW
View
+24.5%$0.19$0.15$0.17-7.5%2.25 millionNews Coverage
Gap Up
High Trading Volume
Apollomics, Inc. stock logo
APLM
Apollomics
+21.6%$5.90$4.85$5.09-13.7%1.09 millionAnalyst Report
News Coverage
Gap Up
High Trading Volume
Samsara Inc. stock logo
IOT
Samsara
+20.7%$22.95$19.01$24.31+5.9%21.39 millionAnalyst Report
Insider Selling
Options Volume
News Coverage
Gap Up
High Trading Volume
HeadHunter Group PLC stock logo
HHR
HeadHunter Group
+20.7%$18.14$15.03$15.03-17.1%3.47 millionGap Up
High Trading Volume
Digital Media Solutions, Inc. stock logo
DMS
Digital Media Solutions
+20.0%$0.42$0.35$0.42-0.4%719,854Gap Up
High Trading Volume
Aenza S.A.A. stock logo
AENZ
Aenza S.A.A.
+18.2%$2.08$1.76$2.04-1.9%1,724Gap Up
Leju Holdings Limited stock logo
LEJU
Leju
+16.4%$1.99$1.71$1.64-17.6%76,614Analyst Report
Gap Up
Nemaura Medical Inc. stock logo
NMRD
Nemaura Medical
+16.2%$0.62$0.53$0.55-10.7%42,619News Coverage
Gap Up
Quanex Building Products Co. stock logo
NX
Quanex Building Products
+16.1%$24.47$21.08$26.02+6.3%385,787Earnings Report
News Coverage
Gap Up
High Trading Volume
Lululemon Athletica Inc. stock logo
LULU
Lululemon Athletica
+15.2%$378.23$328.35$365.44-3.4%9.29 millionEarnings Report
Analyst Report
Options Volume
News Coverage
Gap Up
High Trading Volume
The Chemours Company stock logo
CC
Chemours
+13.2%$30.69$27.11$33.64+9.6%5.71 millionShort Interest ↑
News Coverage
Gap Up
High Trading Volume
Panbela Therapeutics, Inc. stock logo
PBLA
Panbela Therapeutics
+12.9%$7.18$6.36$6.58-8.4%392,321Stock Split
News Coverage
Gap Up
Trading Halted
High Trading Volume
Clever Leaves Holdings Inc. stock logo
CLVR
Clever Leaves
+12.8%$0.28$0.25$0.26-5.4%145,894Positive News
Gap Up
LumiraDx Limited stock logo
LMDX
LumiraDx
+12.7%$0.40$0.36$0.41+1.3%175,384Gap Up
MRDB
MariaDB
+12.6%$0.96$0.85$0.95-0.7%71,886Positive News
Gap Up
Acurx Pharmaceuticals, Inc. stock logo
ACXP
Acurx Pharmaceuticals
+12.5%$3.32$2.95$2.92-12.0%20,555Gap Up
Remark Holdings, Inc. stock logo
MARK
Remark
+12.4%$1.45$1.29$1.35-6.9%2.17 millionNews Coverage
Positive News
Gap Up
Minority Equality Opportunities Acquisition Inc. stock logo
MEOA
Minority Equality Opportunities Acquisition
+12.4%$12.42$11.05$26.54+113.7%1.25 millionGap Up
High Trading Volume
HCW Biologics Inc. stock logo
HCWB
HCW Biologics
+11.7%$1.69$1.51$1.58-6.3%15,118Gap Up
Rain Oncology Inc. stock logo
RAIN
Rain Oncology
+11.7%$1.24$1.11$1.26+1.6%7.40 millionAnalyst Downgrade
Insider Buying
Analyst Revision
Gap Up
High Trading Volume
Diversified Healthcare Trust stock logo
DHC
Diversified Healthcare Trust
+11.6%$1.63$1.46$1.69+3.7%10.02 millionAnalyst Report
Insider Buying
Options Volume
News Coverage
Positive News
Gap Up
High Trading Volume
Shapeways Holdings, Inc. stock logo
SHPW
Shapeways
+11.5%$0.58$0.52$0.52-9.5%120,096Gap Up
Big Lots, Inc. stock logo
BIG
Big Lots
+11.5%$5.43$4.87$6.07+11.8%5.89 millionEarnings Report
Analyst Report
Insider Buying
News Coverage
Gap Up
High Trading Volume
EZGO Technologies Ltd. stock logo
EZGO
EZGO Technologies
+10.7%$1.55$1.40$1.47-5.2%8,202Positive News
Gap Up
Rockwell Medical, Inc. stock logo
RMTI
Rockwell Medical
+10.5%$4.10$3.71$4.22+2.9%1.53 millionAnalyst Report
Analyst Revision
News Coverage
Gap Up
High Trading Volume
USD Partners LP stock logo
USDP
USD Partners
+10.4%$0.90$0.82$0.92+2.5%122,873Gap Up
GT Biopharma, Inc. stock logo
GTBP
GT Biopharma
+10.3%$0.27$0.25$0.29+5.7%763,342Gap Up
High Trading Volume
DISH Network Co. stock logo
DISH
DISH Network
+10.2%$6.92$6.28$7.30+5.5%43.73 millionOptions Volume
Gap Up
High Trading Volume
Immix Biopharma, Inc. stock logo
IMMX
Immix Biopharma
+10.1%$2.19$1.99$2.04-6.8%150,475Positive News
Gap Up
BT Brands, Inc. stock logo
BTBD
BT Brands
+10.0%$2.65$2.41$2.65flat20,745Gap Up
High Trading Volume
ASP Isotopes Inc. stock logo
ASPI
ASP Isotopes
+9.9%$0.37$0.33$0.36-0.7%242,217Gap Up
Qurate Retail, Inc. stock logo
QRTEB
Qurate Retail
+9.7%$5.76$5.25$5.51-4.3%3,517Gap Up
FibroGen, Inc. stock logo
FGEN
FibroGen
+9.7%$19.00$17.32$17.88-5.9%1.42 millionAnalyst Upgrade
Gap Up
Roth Ch Acquisition V Co. stock logo
ROCL
Roth Ch Acquisition V
+9.5%$11.33$10.35$10.38-8.4%534Gap Up
PyroGenesis Canada Inc. stock logo
PYR
PyroGenesis Canada
+9.4%$0.89$0.81$0.81-9.0%28,608Gap Up
Bionano Genomics, Inc. stock logo
BNGO
Bionano Genomics
+9.3%$0.80$0.73$0.79-0.8%15.62 millionGap Up
High Trading Volume
Intchains Group Limited stock logo
ICG
Intchains Group
+9.1%$9.00$8.25$8.90-1.1%6,880Gap Up
Sunlight Financial Holdings Inc. stock logo
SUNL
Sunlight Financial
+9.1%$0.42$0.38$0.39-6.1%99,916Gap Up
WISeKey International Holding AG stock logo
WKEY
WISeKey International
+9.0%$2.18$2.00$2.15-1.4%174,912Positive News
Gap Up
CBAK Energy Technology, Inc. stock logo
CBAT
CBAK Energy Technology
+8.9%$1.10$1.01$1.20+9.1%1.73 millionPositive News
Gap Up
High Trading Volume
Genenta Science S.p.A. stock logo
GNTA
Genenta Science
+8.9%$6.00$5.51$5.86-2.3%3,329Gap Up
Orgenesis Inc. stock logo
ORGS
Orgenesis
+8.8%$1.24$1.14$1.18-4.8%32,713Gap Up
Bright Scholar Education Holdings Limited stock logo
BEDU
Bright Scholar Education
+8.7%$1.88$1.73$1.62-13.8%14,844Gap Up
High Trading Volume
Sigilon Therapeutics, Inc. stock logo
SGTX
Sigilon Therapeutics
+8.6%$4.56$4.20$4.30-5.7%10,228Stock Split
Gap Up
Talis Biomedical Co. stock logo
TLIS
Talis Biomedical
+8.4%$0.50$0.46$0.49-2.0%105,163Gap Up
Sanara MedTech Inc. stock logo
SMTI
Sanara MedTech
+8.2%$37.80$34.92$37.20-1.6%25,679Positive News
Gap Up
Five Below, Inc. stock logo
FIVE
Five Below
+8.2%$183.17$169.35$182.55-0.3%2.58 millionEarnings Report
Analyst Report
Analyst Revision
News Coverage
Gap Up
High Trading Volume
China Liberal Education Holdings Limited stock logo
CLEU
China Liberal Education
+8.1%$0.80$0.74$0.77-3.8%3.31 millionGap Up
High Trading Volume
Astra Space, Inc. stock logo
ASTR
Astra Space
+8.0%$0.38$0.35$0.36-5.6%1.08 millionGap Up
Ozon Holdings PLC stock logo
OZON
Ozon
+7.9%$12.52$11.60$11.60-7.3%4.39 millionGap Up
High Trading Volume
Sidus Space, Inc. stock logo
SIDU
Sidus Space
+7.9%$0.22$0.21$0.20-9.8%7.04 millionNews Coverage
Positive News
Gap Up
Electra Battery Materials Co. stock logo
ELBM
Electra Battery Materials
+7.8%$1.20$1.11$1.28+6.7%144,523Gap Up
High Trading Volume
Stratasys Ltd. stock logo
SSYS
Stratasys
+7.8%$15.70$14.57$16.21+3.2%2.68 millionNews Coverage
Gap Up
High Trading Volume
Heart Test Laboratories, Inc. stock logo
HSCS
Heart Test Laboratories
+7.6%$1.08$1.00$1.07-0.5%74,686Gap Up
Data Storage Co. stock logo
DTST
Data Storage
+7.6%$1.98$1.84$1.93-2.5%43,815Gap Up
Context Therapeutics Inc. stock logo
CNTX
Context Therapeutics
+7.5%$1.14$1.06$1.28+12.3%1.06 millionNews Coverage
Gap Up
EpicQuest Education Group International Limited stock logo
EEIQ
EpicQuest Education Group International
+7.5%$2.15$2.00$2.09-2.8%19,991Gap Up
Adamas One Corp. stock logo
JEWL
Adamas One
+7.5%$0.86$0.80$0.85-0.9%78,715Lockup Expiration
News Coverage
Gap Up
Aceragen, Inc. stock logo
ACGN
Aceragen
+7.5%$1.73$1.61$1.67-3.5%16,818Upcoming Earnings
Gap Up
PACI
PROOF Acquisition Corp I
+7.2%$11.26$10.50$10.52-6.6%60,001Gap Up
Asana, Inc. stock logo
ASAN
Asana
+7.2%$24.50$22.85$22.20-9.4%7.09 millionEarnings Report
Analyst Report
News Coverage
Gap Up
High Trading Volume
Momentus Inc. stock logo
MNTS
Momentus
+7.2%$0.35$0.33$0.32-8.2%644,194Gap Up
Gol Linhas Aéreas Inteligentes S.A. stock logo
GOL
Gol Linhas Aéreas Inteligentes
+7.0%$3.69$3.45$3.56-3.5%1.87 millionGap Up
Kanzhun Limited stock logo
BZ
Kanzhun
+6.8%$15.60$14.61$14.75-5.4%3.71 millionGap Up
Inter & Co, Inc. stock logo
INTR
Inter & Co, Inc.
+6.8%$3.00$2.81$2.93-2.3%467,617Gap Up
Grifols, S.A. stock logo
GRFS
Grifols
+6.7%$8.90$8.34$8.80-1.1%435,104Gap Up
HeartCore Enterprises, Inc. stock logo
HTCR
HeartCore Enterprises
+6.7%$1.75$1.64$1.58-9.7%180,279Positive News
Gap Up
Nocera, Inc. stock logo
NCRA
Nocera
+6.7%$1.60$1.50$1.65+3.1%7,670Gap Up
Chimerix, Inc. stock logo
CMRX
Chimerix
+6.5%$1.48$1.39$1.45-2.0%728,951Gap Up
China Green Agriculture, Inc. stock logo
CGA
China Green Agriculture
+6.4%$2.82$2.65$2.91+3.2%16,810Analyst Report
Gap Up
Watsco Inc stock logo
WSO.B
Watsco
+6.4%$339.75$319.30$339.75flat13Gap Up
Broadway Financial Co. stock logo
BYFC
Broadway Financial
+6.3%$1.01$0.95$0.97-4.0%177,156Gap Up
Banco Bradesco S.A. stock logo
BBDO
Banco Bradesco
+6.3%$2.72$2.56$2.73+0.4%43,149Gap Up
Akumin Inc. stock logo
AKU
Akumin
+6.2%$0.42$0.40$0.38-9.4%61,004Positive News
Gap Up
Nisun International Enterprise Development Group Co., Ltd stock logo
NISN
Nisun International Enterprise Development Group
+6.2%$3.95$3.72$3.74-5.3%3,887News Coverage
Positive News
Gap Up
Kingstone Companies, Inc. stock logo
KINS
Kingstone Companies
+6.1%$1.39$1.31$1.40+0.7%28,041Gap Up
Moolec Science SA stock logo
MLEC
Moolec Science
+6.1%$3.14$2.96$3.02-3.8%16,518Gap Up
SMX (Security Matters) Public Limited stock logo
SMX
SMX (Security Matters) Public
+6.1%$1.05$0.99$1.02-2.9%149,635Gap Up
9F Inc. stock logo
JFU
9F
+6.0%$5.09$4.80$5.02-1.4%6,385Gap Up
Sunworks, Inc. stock logo
SUNW
Sunworks
+6.0%$1.58$1.49$1.58flat1.25 millionGap Up
Praxis Precision Medicines, Inc. stock logo
PRAX
Praxis Precision Medicines
+6.0%$0.93$0.88$1.01+8.6%1.69 millionAnalyst Report
News Coverage
Gap Up
DuPont de Nemours, Inc. stock logo
DD
DuPont de Nemours
+6.0%$71.50$67.44$72.37+1.2%7.98 millionEx-Dividend
Gap Up
High Trading Volume
Xinyuan Real Estate Co., Ltd. stock logo
XIN
Xinyuan Real Estate
+6.0%$3.35$3.16$3.27-2.4%10,241Analyst Report
Gap Up
Genprex, Inc. stock logo
GNPX
Genprex
+6.0%$0.99$0.93$1.04+5.1%1.61 millionAnalyst Revision
News Coverage
Gap Up
High Trading Volume
Cleveland-Cliffs Inc. stock logo
CLF
Cleveland-Cliffs
+5.9%$14.90$14.07$15.05+1.0%11.87 millionAnalyst Downgrade
Options Volume
Gap Up
Rigetti Computing, Inc. stock logo
RGTI
Rigetti Computing
+5.8%$1.01$0.95$0.88-13.1%3.39 millionGap Up
High Trading Volume
Arqit Quantum Inc. stock logo
ARQQ
Arqit Quantum
+5.8%$1.45$1.37$1.26-13.1%1.73 millionPositive News
Gap Up
Latch, Inc. stock logo
LTCH
Latch
+5.8%$1.09$1.03$1.21+11.0%1.26 millionUpcoming Earnings
Gap Up
High Trading Volume
Science 37 Holdings, Inc. stock logo
SNCE
Science 37
+5.8%$0.25$0.23$0.26+6.1%384,560Gap Up
KE Holdings Inc. stock logo
BEKE
KE
+5.8%$15.98$15.11$16.11+0.8%11.93 millionGap Up
Markforged Holding Co. stock logo
MKFG
Markforged
+5.7%$0.92$0.87$1.00+8.3%671,788Positive News
Gap Up
iQIYI, Inc. stock logo
IQ
iQIYI
+5.7%$4.42$4.18$4.45+0.7%13.76 millionGap Up
Belite Bio, Inc stock logo
BLTE
Belite Bio
+5.6%$17.98$17.02$17.15-4.6%61,370Gap Up
High Trading Volume
How Investors Can Identify and Successfully Trade Gap-Up Stocks

Trading gap-up stocks can be a profitable strategy for active, risk-tolerant investors

A gap-up stock is one that opens trading at a higher level than the previous day’s closing price. This is often signified by a sharp move with no other trading occurring before or after the gap. Investors can identify gap-up stocks during after-hours and pre-market trading. Reasons why a sock may gap up include the release of news about the stock, such as a favorable earnings report or some sort of geo-political event that may incite speculators to bid up the price of the stock.

A gap-up stock represents a significant stock trading opportunity. However, it requires the discipline to follow the trend and setting trailing stops that allow investors to exit the trade when the direction of the stock no longer supports that trend.

In this article we’ll break down gap-up stocks by defining what they are and how you can identify them. We’ll also provide an overview of gaps so that you can understand how to interpret a stock chart. We’ll also go over the most common gap trading strategies.

A stock that is gapping up indicates a large volume of buyers. However, what’s harder to tell is whether the gapping action is short lived or whether it will continue to become a trend. Investors who want to trade gap-up stocks can easily find them by using a stock screener. Once you identify a potential gap-up stock to trade, you should carefully study the longer term charts of the stock to see if there are clearly defined areas of support and resistance.

If you’re new to gap trading, it is important to look at stocks that are trading with a high volume (a good average volume is above 500,000 shares a day). A gap up stock is clearly represented in a candlestick pattern. A candlestick is a technical indicator that shows the opening and closing price of a stock for a specific period. The color and composition of the candlestick provide information about a stock’s direction and momentum.

The gap in a gap-up stock is either a “full gap” or “partial gap”.

  • A full gap occurs when a stock opens at a higher level than the previous session’s high.
  • A partial gap occurs when a stock opens above the previous day’s closing price.

Here’s an example that illustrates the difference between a full gap and a partial gap. During the trading day, the stock of Company ABC closes at $39. However, during the day the stock was trading as high as $41. At the opening bell the next day, the stock opens at $42.50. That stock would be opening higher than both its previous close ($39) and its previous daily high ($41). This would indicate a full gap. However, if the same stock opens at $40, it will only show a partial gap. While closing above its previous closing price of $39, it did not “gap up” above the previous session’s high price of $41.

 The importance of understanding the difference between a full gap and a partial gap is about supply and demand which highlights the difference in risk and potential gain. In general, full gap stocks provide a better opportunity for profit over several days.

For example, a full gap means there is usually sufficient desire to buy or sell the stock. This increased demand will be a signal to market makers that there has to be a significant price change to accommodate any orders that have to be filled. With a partial gap, demand might be such that only a small price increase above the closing price will allow buy or sell orders to be filled.

Beyond the terms full gap and partial gap, gaps generally fall into one of four categories:

  • Breakaway Gaps – These are gaps that take place at the end of a pricing pattern and signal the start of a new trend. Breakaway gaps will coincide with high volume.
  • Exhaustion Gaps – These are gaps that take place towards the end of a pricing pattern and represent a final attempt to set a new high or low. Exhaustion gaps will coincide with low volume.
  • Common Gaps – These are gaps that cannot be placed in a price pattern. These simply represent an area where the price has gapped.
  • Continuation Gaps – These gaps occur in the middle of a price pattern and signal a rush of buyers or sellers who share a common belief in the underlying stock’s future direction.

It is common for gaps to get filled in naturally. This means the stock price will move back to its original level. Because of the volatility around earnings season, this is typically a time when stocks will make large price movements.

In some cases, investors (usually individual investors) may be overly enthusiastic about a stock. In almost every case, this will result in a correction. Another reason may be due to a lack of support and resistance. Support and resistance lines are technical indicators that traders can use to set price targets. When a stock gaps up, it usually doesn’t leave behind a support or resistance line to anchor that price level. Finally, the type of price pattern can indicate whether a gap will be filled. For example, exhaustion gaps come at the end of a price pattern, making them more likely to be filled. Breakaway and continuation gaps, which are confirming the direction of a trend, are less likely to be filled.

When gaps get filled within the same trading day as they occur, the gap is said to have undergone fading. This is common during times such as earnings season.

As an investment strategy, trading gaps involve stocks that have above-average volatility. This also means it entails above average risk. However, investors can trade gaps successfully (and profitably). Here are some guidelines that can help you stay away from poor gap-up stock trades.

  • If the gap of a stock has started to fill, it will almost always continue in that direction. This is because the stock has no immediate support and resistance.
  • Be sure you understand the type of gap you are trading. An exhaustion gap and continuation gap move in opposite directions.
  • Before you take a position, be sure that the stock price has started to break in the direction you foresee. Individual investors are the ones who tend to get overly enthusiastic about a stock. This plays into the hand of institutional investors who may support the trend in order to boost their portfolios.
  • The volume should be consistent with the kind of gap you are trading.

Once you are familiar with the mechanics of gaps and understanding how to look for potential gap trading opportunities, it’s time to look at some common gap trading strategies. These involve having clear rules for entering and exiting a trade. Gap trading can be risky and having the discipline to follow entry and exit points is one way for you to help minimize that risk.

For each gap up strategy, there is a short and a long trading signal. Most gap trading occurs one hour after the market opens to allow time for the stock price to settle into a range. No matter what strategy is being used, it is important to set trailing stops that provide a point where you exit the trade in case the trade starts moving in the opposite direction. For example, if you buy a stock at $50, you could set a trailing stop of 5 percent, in this case $47.50. If the stock rises to $60, you raise the stop to $55.50 (5% of $60) and keep on raising it while the price rises. The opposite would occur if you’re trying to short the same stock at $50. In this case, you would set a trailing stop at $53.50. If the price drops to $40, you would reset the stop at $42. Trailing stops will usually be tighter (smaller) for partial gap stocks as opposed to full gap stocks.

Here are the most common trading strategies for gap-up stocks. These will occur one hour after the market open (typically 10:30 A.M. EST). The same strategy is applied to either full gap or partial gap positions. These strategies also work for after-hours or pre-market trading.

  • Long Position (Buy): Set a long trailing stop at two ticks (defined by the bid/ask spread) above whatever the high stock price was in the first hour of trading after the market open. The bid/ask spread is usually either one-eight or one-quarter point.
  • Short Position (Sell): Set a long trailing stop at two ticks below the lowest stock price reached in the first hour of trading.

The Modified Trading Method is an advanced version of the two strategies shown above. This method can apply to either the long or short position. The difference in this method is that instead of requiring a trader to wait until the price breaks above the high (long) or below the low (short), they trade in the middle of a price rebound. This strategy is only used on a stock that has been trading on at least 2X its average volume over the previous five days.

  • Modified Trading Method Long Position (Buy): Set a long stop that is equal to the average of the open price and the high price that was set in the first hour of trading.
  • Modified Trading Method Short Position (Sell): Set a long stop that is equal to the average of the open price and the low price that was set in the first hour of trading.

Many investors engage in momentum trading. To these investors “trading the gap” (also called “gapping”) is not logical. After all, what goes up must come down – and usually hard. So if a stock gaps up, it’s due for a correction?

This thinking can be true for stocks that show weak fundamentals, or when the market is trending down. In those cases, gap-up stocks – no matter how strong the lift – rarely stay at those levels. However, that thinking can work against investors when the right conditions are met.

For example, in a bullish market, a stock that is showing strong fundamentals may gap up after a strong earnings report. When institutional investors learn about the bullish report, they may drive the price even higher. If traders stay away from the stock believing that momentum is working against them, they may miss out on significant gains.

One of the easiest ways to trade stocks, especially if you are looking to become a day trader is to look for gap-up stocks. Gap-up stocks are stocks that show significant price movement after the stock market closes for the day.

Investors can find gap-up stocks at any time. However, they are particularly common during earnings season when top line and/or EPS numbers that beat analysts’ expectations can cause a stock to surge. Today’s online stock screeners give investors an easy way for traders to identify and track gap-up stocks.

Trading gap-up stocks requires a disciplined system that requires traders to use trailing stops at well-defined entry and exit points to limit loss and protect profits. Not every gap stop is ideal for trading. Investors need to pay attention to other technical indicators such as trading volume to decide whether or not a stock may produce a profitable trade.


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