In technical analysis, a gap on a chart representing a sudden and large price movement accompanied by high trading volume. A runaway gap usually occurs in the middle of an upward or downward trend and is used to confirm the intensity of the trend. Runaway gaps may occur, for example, when the price of a security suddenly doubles when it has been increasing, or halves when it has been decreasing. As with many charting terms, it may be bullish or bearish; a sudden movement upward is a bullish breakaway gap, while a sudden movement downward is bearish. See also: Breakaway Gap.
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In technical analysis, a chart pattern that indicates the rapid price movement of a security and is characterized by a gap that forms for a range of prices in which no trading occurs. Runaway gaps occur during strong bull or bear movements on high volume. In general, technical analysts believe a security's price will return to the price range at which a gap occurs to fill in the missing prices. Thus, a strong upward movement with a runaway gap is likely to be followed by a downward correction to the price at which the gap occurred. A downward runaway gap signals the opposite correction. Compare breakaway gap. See also exhaustion gap.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.