Exhaustion Gap

An exhaustion gap is a price gap that appears near the end of a strong, extended trend — signalling that the final surge of momentum is being driven by the last remaining participants scrambling to enter, while the smart money is quietly exiting. It looks similar to a runaway gap in real time, but is distinguished by its occurrence after a prolonged trend, often accompanied by extremely high volume that reflects climactic buying or selling rather than healthy trend continuation. After an exhaustion gap, prices typically reverse direction sharply — the gap is filled relatively quickly, and the prior trend reverses. Identifying exhaustion gaps requires context — they only have meaning after an extended trend, and confirmation comes from the swift price reversal and gap-fill that follows. In Indian equity markets, exhaustion gaps are common in speculative small-cap and penny stock rallies, where retail investor FOMO drives a final surge before insiders and early buyers distribute their holdings and the stock collapses.