A gap is a hole in prices which occurs when the current day’s high is below the previous day’s low or when the current days low is above the previous day’s high. Gaps indicate a sudden change of direction and, if left unfilled, can hint toward a major price reversal. Until filled, the gap serves as a magnet, drawing prices back into the gap, especially when prices are nearby. If a gap is “filled” by subsequent price action, it tends to lose its predictive power.
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