BREAKAWAY GAP Meaning and
Definition
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A breakaway gap is a term used in technical analysis to describe a significant departure in the price of a security or asset from its previous trading range. It refers to a gap that forms on a chart when the price suddenly breaks out of a consolidation phase or a pattern, indicating a strong shift in market sentiment and momentum.
This type of gap commonly occurs after a period of consolidation, where the price range has been relatively narrow with limited movement. When the breakaway gap forms, it signifies a sudden increase in buying or selling pressure, causing the price to move abruptly and leaving a noticeable gap between the previous day's closing price and the current day's opening price.
Breakaway gaps are considered important technical indicators, as they often signal the beginning of a new trend or a breakout from a significant support or resistance level. They indicate a shift in investor sentiment and can provide confirmation of a shift in the supply-demand dynamics of the security.
Traders and investors often analyze the characteristics of breakaway gaps, such as the size of the gap and the volume accompanying the gap, to gain insights into the potential duration and strength of the new trend. Breakaway gaps can be bullish or bearish, depending on the direction of the gap and the prevailing trend.
Overall, breakaway gaps represent a sudden and significant shift in the price of a security, which can signal the start of a new trend or the confirmation of an existing one.
Etymology of BREAKAWAY GAP
The term "breakaway gap" combines the words "breakaway" and "gap", each of which has its own etymology.
1. "Breakaway": The word "breakaway" is derived from the verb "break", which can be traced back to the Old English word "brecan" meaning "to smash" or "to shatter". Over time, "breakaway" evolved to mean "to detach" or "to separate forcefully". In the context of finance or trading, a breakaway refers to a sudden and significant movement or change in price that breaks away from the previous pattern or trend.
2. "Gap": The word "gap" comes from the Old Norse word "gá" or the Old English word "gæp", both meaning "an opening" or "a hole".
