Breakout Gaps

I am new to the space of intraday trading and I found your piece on ‘price volume breakout’ to be very insightful for novice traders such as myself. I would like DSIJ to help me understand what a breakout gap is and what does it indicate?

- Santosh Chakarvarti

Editor Responds: Thank you for writing to us with your query. A breakout gap is a term used in technical analysis which identifies a strong price movement through support and resistance. The gap, in this case, is the difference between the open and close price where there is no trading activity as opposed to an intraday breakout. A breakaway gap with larger than average volume indicates strong conviction in the gap direction, whereas a volume increase on a breakout gap helps confirm that the price is likely to continue in the breakout direction. If the volume is low on a breakaway gap there is a greater chance of failure. Hope this helps. Do keep writing to us with your queries!