A gap is a change in price levels between the close and open of two consecutive days. Although most technical analysis manuals define the four types of gap patterns as Common, Breakaway, Continuation and Exhaustion, those labels are applied after the chart pattern is established. That is, the difference between any one type of gap from another is only distinguishable after the stock continues up or down in some fashion. Although those classifications are useful for a longer-term understanding of how a particular stock or sector reacts, they offer little guidance for trading.
For trading purposes, we define four basic types of gaps as follows:
Full Gap Down occurs when the opening price is less than yesterday's low
Full Gap Up occurs when the opening price is greater than yesterday's high price.
Partial Gap Up occurs when today's opening price is higher than yesterday's close, but not higher than yesterday's high.
Partial Gap Down occurs when the opening price is below yesterday's close, but not below yesterday's low.
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