A. When a stock opens higher and stays there or even higher, it creates a gap in the stock's price chart. There are two types of stock price gap ups and they have different implications:
Breakaway Gaps
What is it
In a breakaway gap, stock price breaks out a trading pattern and a new trend is starting.
Implications
It is a sign that a bullish trend is about to begin.
Exhaustion Gaps
What is it
An exhaustion gap typically happens at the end of an up or down trend, it is caused by investors abandon previous bets (shorts) against the stock.
Implications
It is a sign that the run-up or the decline is ending, and a reversal is around the corner.