How to trade using Breakaway (or Breakout) Gap Trading Strategy?
How to trade using Breakaway (or Breakout) Gap Trading Strategy?
Different parts of Breakaway (or Breakout) Gap Trading Strategy
The breakaway gap means breaking the important support or resistance or significant trend line in the form of the gap. This generally appears after if there is significant price build up or price consolidation near the support or resistance zone on the previous day.
There are three major parts which forms this pattern.
1. Consolidation – The market consolidates on the previous day, forming tight candles throughout the last hour of the previous day. This consolidation happens near a major support or resistance area.
2. Gap up & Rally – Price gaps up the next day above the consolidation zone or above the resistance area and continue to rally from there. This event had flipped our resistance zone into support zone, so we can call it flip zone.
3. Pullback – After a brief rally, price starts dropping towards the flip zone (previous resistance, which has turned into support now)