QQQ   350.67 (+0.65%)
AAPL   177.54 (+1.20%)
MSFT   332.09 (-0.24%)
META   265.05 (+1.15%)
GOOGL   124.07 (-0.43%)
AMZN   121.71 (+1.33%)
TSLA   198.96 (+3.00%)
NVDA   403.02 (+3.48%)
NIO   7.39 (-4.03%)
BABA   78.60 (-2.93%)
AMD   126.34 (-0.54%)
T   15.65 (+0.97%)
F   12.67 (+4.80%)
MU   72.70 (-1.66%)
CGC   0.87 (-1.33%)
GE   102.14 (-0.58%)
DIS   87.53 (-0.86%)
AMC   4.55 (-1.94%)
PFE   37.10 (-1.33%)
PYPL   61.09 (+1.44%)
NFLX   393.28 (+3.80%)
QQQ   350.67 (+0.65%)
AAPL   177.54 (+1.20%)
MSFT   332.09 (-0.24%)
META   265.05 (+1.15%)
GOOGL   124.07 (-0.43%)
AMZN   121.71 (+1.33%)
TSLA   198.96 (+3.00%)
NVDA   403.02 (+3.48%)
NIO   7.39 (-4.03%)
BABA   78.60 (-2.93%)
AMD   126.34 (-0.54%)
T   15.65 (+0.97%)
F   12.67 (+4.80%)
MU   72.70 (-1.66%)
CGC   0.87 (-1.33%)
GE   102.14 (-0.58%)
DIS   87.53 (-0.86%)
AMC   4.55 (-1.94%)
PFE   37.10 (-1.33%)
PYPL   61.09 (+1.44%)
NFLX   393.28 (+3.80%)
QQQ   350.67 (+0.65%)
AAPL   177.54 (+1.20%)
MSFT   332.09 (-0.24%)
META   265.05 (+1.15%)
GOOGL   124.07 (-0.43%)
AMZN   121.71 (+1.33%)
TSLA   198.96 (+3.00%)
NVDA   403.02 (+3.48%)
NIO   7.39 (-4.03%)
BABA   78.60 (-2.93%)
AMD   126.34 (-0.54%)
T   15.65 (+0.97%)
F   12.67 (+4.80%)
MU   72.70 (-1.66%)
CGC   0.87 (-1.33%)
GE   102.14 (-0.58%)
DIS   87.53 (-0.86%)
AMC   4.55 (-1.94%)
PFE   37.10 (-1.33%)
PYPL   61.09 (+1.44%)
NFLX   393.28 (+3.80%)
QQQ   350.67 (+0.65%)
AAPL   177.54 (+1.20%)
MSFT   332.09 (-0.24%)
META   265.05 (+1.15%)
GOOGL   124.07 (-0.43%)
AMZN   121.71 (+1.33%)
TSLA   198.96 (+3.00%)
NVDA   403.02 (+3.48%)
NIO   7.39 (-4.03%)
BABA   78.60 (-2.93%)
AMD   126.34 (-0.54%)
T   15.65 (+0.97%)
F   12.67 (+4.80%)
MU   72.70 (-1.66%)
CGC   0.87 (-1.33%)
GE   102.14 (-0.58%)
DIS   87.53 (-0.86%)
AMC   4.55 (-1.94%)
PFE   37.10 (-1.33%)
PYPL   61.09 (+1.44%)
NFLX   393.28 (+3.80%)

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.

MarketRank evaluates a company based on community opinion, dividend strength, institutional and insider ownership, earnings and valuation, and analysts forecasts.
Available with a MarketBeat All Access Subscription
MarketRank™Upgrade to All Access to use the All Ranks Filter
Media sentiment refers to the percentage of positive news stories versus negative news stories a company has received in the past week.
Available with a MarketBeat All Access Subscription
Media SentimentUpgrade to All Access to use the All Sentiments Filter
Analyst consensus is the average investment recommendation among Wall Street research analysts.
Available with a MarketBeat All Access Subscription
Analyst ConsensusUpgrade to All Access to use the All Ratings Filter
CompanyGap Up %Opening PricePrevious CloseCurrent PricePrice Change Since OpenDaily VolumeIndicator(s)
Arlington Asset Investment Corp. stock logo
AAIC
Arlington Asset Investment
+50.5%$4.14$2.75$4.02-2.9%4.14 millionShort Interest ↓
News Coverage
Positive News
Gap Up
High Trading Volume
Bit Origin Ltd stock logo
BTOG
Bit Origin
+48.8%$3.00$2.02$1.93-35.7%359,600Stock Split
Short Interest ↓
News Coverage
Gap Up
High Trading Volume
GreenLight Biosciences Holdings stock logo
GRNA
GreenLight Biosciences
+45.4%$0.29$0.20$0.30+2.0%6.57 millionNews Coverage
Positive News
Gap Up
Trading Halted
High Trading Volume
Equitrans Midstream Co. stock logo
ETRN
Equitrans Midstream
+39.9%$8.52$6.09$8.23-3.4%23.41 millionAnalyst Upgrade
Short Interest ↓
Gap Up
High Trading Volume
Alarum Technologies Ltd. stock logo
ALAR
Alarum Technologies
+25.1%$3.94$3.15$3.44-12.7%1.41 millionNews Coverage
Gap Up
High Trading Volume
SRAX, Inc. stock logo
SRAX
SRAX
+25.0%$0.45$0.36$0.45flat768Upcoming Earnings
Gap Up
Taro Pharmaceutical Industries Ltd. stock logo
TARO
Taro Pharmaceutical Industries
+24.5%$36.59$29.39$36.09-1.4%116,494Analyst Upgrade
Short Interest ↑
News Coverage
Gap Up
High Trading Volume
Wearable Devices Ltd. stock logo
WLDS
Wearable Devices
+22.2%$1.43$1.17$2.09+46.2%31.65 millionGap Up
High Trading Volume
Immix Biopharma, Inc. stock logo
IMMX
Immix Biopharma
+21.1%$2.12$1.75$2.00-5.7%850,584Upcoming Earnings
Gap Up
High Trading Volume
Tingo Group, Inc. stock logo
TIO
Tingo Group
+20.6%$4.10$3.40$3.58-12.7%12.44 millionGap Up
High Trading Volume
Iovance Biotherapeutics, Inc. stock logo
IOVA
Iovance Biotherapeutics
+20.4%$9.09$7.55$8.57-5.7%14.09 millionAnalyst Report
News Coverage
Gap Up
High Trading Volume
TOP Financial Group Limited stock logo
TOP
TOP Financial Group
+19.8%$10.94$9.13$9.25-15.4%7.38 millionShort Interest ↓
Gap Up
Trading Halted
High Trading Volume
Atento S.A. stock logo
ATTO
Atento
+17.8%$1.72$1.46$2.94+70.9%33.79 millionUpcoming Earnings
Analyst Report
Gap Up
High Trading Volume
B.O.S. Better Online Solutions Ltd. stock logo
BOSC
B.O.S. Better Online Solutions
+17.5%$3.02$2.57$2.95-2.3%91,833News Coverage
Positive News
Gap Up
High Trading Volume
Anghami Inc. stock logo
ANGH
Anghami
+17.3%$1.29$1.10$0.97-24.6%58,770News Coverage
Gap Up
ATI Physical Therapy, Inc. stock logo
ATIP
ATI Physical Therapy
+15.5%$0.20$0.17$0.18-9.8%332,128Short Interest ↓
Positive News
Gap Up
NEXGEL, Inc. stock logo
NXGL
NEXGEL
+15.3%$2.64$2.29$2.42-8.3%138,450Short Interest ↓
Gap Up
High Trading Volume
Jianpu Technology Inc. stock logo
JT
Jianpu Technology
+15.2%$1.06$0.92$0.97-8.5%12,481News Coverage
Gap Up
C3.ai, Inc. stock logo
AI
C3.ai
+14.2%$37.61$32.94$38.46+2.3%59.99 millionUpcoming Earnings
Options Volume
Gap Up
High Trading Volume
Shapeways Holdings, Inc. stock logo
SHPW
Shapeways
+14.0%$0.59$0.52$0.53-10.1%141,908Short Interest ↑
Gap Up
Eliem Therapeutics, Inc. stock logo
ELYM
Eliem Therapeutics
+14.0%$3.42$3.00$3.20-6.4%1,357Short Interest ↓
Gap Up
Yatra Online, Inc. stock logo
YTRA
Yatra Online
+13.3%$2.21$1.95$1.90-14.0%76,714Gap Up
Cyxtera Technologies, Inc. stock logo
CYXT
Cyxtera Technologies
+13.2%$0.19$0.16$0.16-12.4%728,965Gap Up
Enviva Inc. stock logo
EVA
Enviva
+12.8%$9.63$8.54$9.18-4.7%990,177Short Interest ↓
Gap Up
China Green Agriculture, Inc. stock logo
CGA
China Green Agriculture
+12.5%$2.96$2.63$2.69-9.1%2,110Short Interest ↓
Gap Up
Gaotu Techedu Inc. stock logo
GOTU
Gaotu Techedu
+12.4%$2.80$2.49$2.44-12.9%6.75 millionNews Coverage
Gap Up
UP Fintech Holding Limited stock logo
TIGR
UP Fintech
+12.4%$2.91$2.59$2.63-9.6%5.57 millionNews Coverage
Gap Up
High Trading Volume
Angion Biomedica Corp. stock logo
ANGN
Angion Biomedica
+11.6%$1.06$0.95$1.05-0.6%399,196Positive News
Gap Up
High Trading Volume
Akebia Therapeutics, Inc. stock logo
AKBA
Akebia Therapeutics
+11.5%$1.26$1.13$1.15-9.1%3.06 millionShort Interest ↓
Gap Up
NewAmsterdam Pharma stock logo
NAMS
NewAmsterdam Pharma
+10.5%$14.99$13.57$13.78-8.1%39,388Positive News
Gap Up
a.k.a. Brands Holding Corp. stock logo
AKA
a.k.a. Brands
+10.1%$0.42$0.38$0.41-2.4%127,808Gap Up
Tremor International Ltd stock logo
TRMR
Tremor International
+10.1%$6.65$6.04$6.60-0.8%77,883News Coverage
Gap Up
The L.S. Starrett Company stock logo
SCX
L.S. Starrett
+9.9%$10.77$9.80$10.59-1.7%26,000Gap Up
YS Biopharma Co., Ltd. stock logo
YS
YS Biopharma
+9.8%$1.45$1.32$1.45flat350,777Upcoming Earnings
Positive News
Gap Up
United Homes Group, Inc. stock logo
UHG
United Homes Group
+9.8%$11.49$10.46$11.60+1.0%4,362Positive News
Gap Up
DiaMedica Therapeutics Inc. stock logo
DMAC
DiaMedica Therapeutics
+9.8%$3.02$2.75$2.78-7.9%59,788Short Interest ↓
Positive News
Gap Up
DiaMedica Therapeutics Inc. stock logo
DMAC
DiaMedica Therapeutics
+9.8%$3.02$2.75$2.78-7.9%59,788Short Interest ↓
Positive News
Gap Up
Imunon, Inc. stock logo
IMNN
Imunon
+9.7%$1.36$1.24$1.32-2.9%6,187News Coverage
Positive News
Gap Up
Coherent Corp. stock logo
COHR
Coherent
+9.7%$40.50$36.93$38.28-5.5%4.60 millionGap Up
High Trading Volume
Nouveau Monde Graphite Inc. stock logo
NMG
Nouveau Monde Graphite
+9.5%$3.45$3.15$3.16-8.4%76,160Gap Up
Nymox Pharmaceutical Co. stock logo
NYMX
Nymox Pharmaceutical
+9.5%$0.45$0.41$0.42-6.6%3,074Gap Up
FMET
Fidelity Metaverse ETF
+9.4%$27.00$24.68$24.68-8.6%4,564Positive News
Gap Up
AINC
Ashford
+9.4%$10.13$9.26$9.90-2.3%1,866Gap Up
Pieris Pharmaceuticals, Inc. stock logo
PIRS
Pieris Pharmaceuticals
+9.3%$0.82$0.75$0.75-8.5%221,310Positive News
Gap Up
MRDB
MariaDB
+9.2%$0.95$0.87$0.87-8.4%89,549Gap Up
Airspan Networks Holdings Inc. stock logo
MIMO
Airspan Networks
+9.0%$0.30$0.27$0.25-15.9%35,090Gap Up
The Glimpse Group, Inc. stock logo
VRAR
The Glimpse Group
+9.0%$5.08$4.66$5.74+13.0%1.36 millionOptions Volume
Positive News
Gap Up
High Trading Volume
Orange County Bancorp, Inc. stock logo
OBT
Orange County Bancorp
+9.0%$34.75$31.89$35.30+1.6%2,562Short Interest ↓
News Coverage
Gap Up
Candel Therapeutics, Inc. stock logo
CADL
Candel Therapeutics
+9.0%$1.58$1.45$1.50-5.1%16,160Gap Up
GDTC
CytoMed Therapeutics
+9.0%$2.92$2.68$2.77-5.1%30,052Positive News
Gap Up
ChargePoint Holdings, Inc. stock logo
CHPT
ChargePoint
+9.0%$9.25$8.49$9.49+2.6%15.69 millionUpcoming Earnings
Analyst Upgrade
Gap Up
Fusion Fuel Green PLC stock logo
HTOO
Fusion Fuel Green
+8.9%$3.44$3.16$3.32-3.5%78,199Upcoming Earnings
Positive News
Gap Up
Sonnet BioTherapeutics Holdings, Inc. stock logo
SONN
Sonnet BioTherapeutics
+8.8%$0.47$0.43$0.51+8.5%6.53 millionGap Up
High Trading Volume
Credo Technology Group Holding Ltd stock logo
CRDO
Credo Technology Group
+8.8%$14.93$13.72$14.14-5.3%3.15 millionUpcoming Earnings
Short Interest ↓
Gap Up
Harpoon Therapeutics, Inc. stock logo
HARP
Harpoon Therapeutics
+8.7%$0.71$0.66$0.70-2.1%70,148Gap Up
Aveanna Healthcare Holdings Inc. stock logo
AVAH
Aveanna Healthcare
+8.7%$1.06$0.98$1.19+12.1%435,888Short Interest ↑
Gap Up
Elbit Systems Ltd. stock logo
ESLT
Elbit Systems
+8.3%$209.93$193.76$206.52-1.6%43,068News Coverage
Gap Up
Viracta Therapeutics, Inc. stock logo
VIRX
Viracta Therapeutics
+8.2%$1.58$1.46$1.34-15.3%227,444Gap Up
SAI.TECH Global Co. stock logo
SAI
SAI.TECH Global
+8.2%$1.58$1.46$1.45-8.2%300,618Gap Up
Diebold Nixdorf, Incorporated stock logo
DBD
Diebold Nixdorf
+8.2%$0.27$0.25$0.27flat330,872Analyst Report
News Coverage
Gap Up
Trading Halted
UiPath Inc. stock logo
PATH
UiPath
+8.1%$16.88$15.62$16.38-3.0%12.11 millionGap Up
TeraWulf Inc. stock logo
WULF
TeraWulf
+8.0%$1.62$1.50$1.61-0.9%2.11 millionPositive News
Gap Up
Bit Digital, Inc. stock logo
BTBT
Bit Digital
+7.9%$2.99$2.77$3.22+7.7%4.21 millionShort Interest ↓
Positive News
Gap Up
Forward Industries, Inc. stock logo
FORD
Forward Industries
+7.9%$1.10$1.02$1.02-7.3%17,476Short Interest ↑
Gap Up
Vapotherm, Inc. stock logo
VAPO
Vapotherm
+7.9%$0.67$0.62$0.60-9.9%34,592Gap Up
BYNO
byNordic Acquisition
+7.9%$11.34$10.51$10.57-6.8%4,550Positive News
Gap Up
Rocky Brands, Inc. stock logo
RCKY
Rocky Brands
+7.9%$20.80$19.28$19.43-6.6%14,371Short Interest ↓
Gap Up
Marpai, Inc. stock logo
MRAI
Marpai
+7.9%$0.75$0.70$0.70-7.8%1.15 millionNews Coverage
Gap Up
Alterity Therapeutics Limited stock logo
ATHE
Alterity Therapeutics
+7.7%$2.81$2.61$2.85+1.4%12,509News Coverage
Gap Up
Kingsoft Cloud Holdings Limited stock logo
KC
Kingsoft Cloud
+7.7%$4.08$3.79$4.31+5.6%3.48 millionShort Interest ↑
Gap Up
Kronos Bio, Inc. stock logo
KRON
Kronos Bio
+7.6%$1.69$1.57$1.52-10.1%180,772Positive News
Gap Up
Patriot National Bancorp, Inc. stock logo
PNBK
Patriot National Bancorp
+7.6%$7.49$6.96$7.35-1.9%4,889Gap Up
PyroGenesis Canada Inc. stock logo
PYR
PyroGenesis Canada
+7.5%$0.72$0.67$0.88+22.2%171,696Gap Up
High Trading Volume
Oncolytics Biotech Inc. stock logo
ONCY
Oncolytics Biotech
+7.4%$1.88$1.75$1.75-6.9%261,514Gap Up
SoFi Technologies, Inc. stock logo
SOFI
SoFi Technologies
+7.4%$5.81$5.41$5.77-0.7%34.89 millionGap Up
WEL
Integrated Wellness Acquisition
+7.2%$11.39$10.62$10.62-6.8%1,500Gap Up
Riot Platforms, Inc. stock logo
RIOT
Riot Platforms
+7.2%$11.71$10.92$11.91+1.7%25.54 millionShort Interest ↓
Gap Up
Gevo, Inc. stock logo
GEVO
Gevo
+7.2%$1.19$1.11$1.35+13.3%8.86 millionPositive News
Gap Up
AcelRx Pharmaceuticals, Inc. stock logo
ACRX
AcelRx Pharmaceuticals
+7.2%$1.19$1.11$1.05-11.8%159,898Short Interest ↓
Positive News
Gap Up
Inventiva S.A. stock logo
IVA
Inventiva
+7.1%$3.02$2.82$3.04+0.7%1,787Positive News
Gap Up
FaZe Holdings Inc. stock logo
FAZE
FaZe
+7.0%$0.59$0.55$0.55-6.8%99,975Gap Up
Lexicon Pharmaceuticals, Inc. stock logo
LXRX
Lexicon Pharmaceuticals
+6.9%$3.40$3.18$2.85-16.2%8.39 millionShort Interest ↑
Gap Up
High Trading Volume
Impel Pharmaceuticals Inc. stock logo
IMPL
Impel Pharmaceuticals
+6.8%$1.28$1.20$1.20-6.3%17,759Short Interest ↓
Positive News
Gap Up
Quantum Co. stock logo
QMCO
Quantum
+6.8%$1.25$1.17$1.20-4.0%245,108Upcoming Earnings
Gap Up
ThredUp Inc. stock logo
TDUP
ThredUp
+6.8%$2.35$2.20$2.14-8.9%403,919Gap Up
Marin Software Incorporated stock logo
MRIN
Marin Software
+6.8%$0.79$0.74$0.76-3.7%495,774Gap Up
High Trading Volume
ETAO International Co., Ltd. stock logo
ETAO
ETAO International
+6.8%$0.47$0.44$0.44-5.5%41,378Positive News
Gap Up
NetSol Technologies, Inc. stock logo
NTWK
NetSol Technologies
+6.8%$2.37$2.22$2.33-1.7%674Positive News
Gap Up
CleanSpark, Inc. stock logo
CLSK
CleanSpark
+6.6%$4.51$4.23$4.39-2.7%6.35 millionGap Up
NVDL
GraniteShares 1.5x Long NVDA Daily ETF
+6.6%$80.35$75.40$79.47-1.1%331,055Positive News
Gap Up
High Trading Volume
iShares MSCI Turkey ETF stock logo
TUR
iShares MSCI Turkey ETF
+6.5%$31.50$29.57$31.36-0.4%479,549Short Interest ↑
News Coverage
Gap Up
Vitesse Energy, Inc. stock logo
VTS
Vitesse Energy
+6.5%$23.21$21.79$23.80+2.5%643,260Gap Up
Skillful Craftsman Education Technology Limited stock logo
EDTK
Skillful Craftsman Education Technology
+6.5%$1.65$1.55$1.56-5.5%10,004Short Interest ↓
Positive News
Gap Up
Mullen Automotive, Inc. stock logo
MULN
Mullen Automotive
+6.4%$0.86$0.81$0.88+2.7%30.90 millionGap Up
ProMIS Neurosciences, Inc. stock logo
PMN
ProMIS Neurosciences
+6.4%$5.32$5.00$4.89-8.1%1,394Positive News
Gap Up
Cyclo Therapeutics, Inc. stock logo
CYTH
Cyclo Therapeutics
+6.4%$1.37$1.29$1.31-4.4%26,644Gap Up
Bitfarms Ltd. stock logo
BITF
Bitfarms
+6.4%$1.17$1.10$1.18+0.9%3.81 millionShort Interest ↓
Gap Up
SHL Telemedicine Ltd. stock logo
SHLT
SHL Telemedicine
+6.4%$12.71$11.95$12.41-2.4%708Gap Up
Sify Technologies Limited stock logo
SIFY
Sify Technologies
+6.3%$1.68$1.58$1.71+1.8%527,007Short Interest ↓
Gap Up
High Trading Volume
Applied Optoelectronics, Inc. stock logo
AAOI
Applied Optoelectronics
+6.3%$2.02$1.90$2.29+13.4%525,445Positive News
Gap 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.


More Stock Ideas from MarketBeat

My Account -