The Homebuilding Gap

The breakout gap signalizes the start of a move; the runaway gap marks its rapid continuation at or near its halfway point; the exhaustion gap comes at the end. The first two of these are easily distinguished as to type by their location with respect to the preceding price pattern, but the last is not always immediately distinguishable from the second.

Runaway gaps are usually not covered for a considerable length of time, not as a rule until the market stages a swing of Major or full Intermediate proportions in the opposite direction. But exhaustion gaps are quickly closed, most often within two to five days, a fact which furnishes a final clue to distinguish exhaustion from continuation if it should still be needed at that stage.