Gap Up and Gap Down

A gap up occurs when a stock or index opens significantly higher than its previous closing price, leaving a visible empty space on the price chart with no trading activity in between. A gap down is the opposite — the opening price is materially below the prior close. Gaps are caused by news events, earnings announcements, corporate actions, or macroeconomic developments that occur outside market hours, forcing the market to reprice sharply at the open. In Indian equity markets, gap ups and gap downs are common at the Nifty 50 open following significant overnight moves in US markets, SGX Nifty futures, or major domestic policy announcements. Technical analysts categorise gaps as breakaway gaps (signal a new trend), runaway gaps (occur mid-trend confirming momentum), and exhaustion gaps (appear near the end of a trend). Most gaps eventually get 'filled' — the price retraces to close the gap — though the timing is unpredictable.