What is the Breakaway gap?
It occurs when the price goes above the resistance or below the support. It changes price direction from the existing chart pattern.
Here, there was a price trend for 1 month where prices were trading in the ascending parallel channel.
But on the 13th of June, it changed its direction.
Impact of Breakaway gap?
It creates a strong resistance. When it occurs on the downside, the probability of the gap getting filled is very low because market participants become fearful and a chain reaction kicks in.
Whereas in an upside breakaway gap, it acts as support and there is a higher possibility of slight retracement because here participants become greedy and close their position.
How to trade it?
In the downside breakaway gap, consider the low of the previous candle as a point of exit and short the calls
In the Upside breakaway gap, consider the high of the previous candle as a point of exit and short the puts
It occurs when the price goes above the resistance or below the support. It changes price direction from the existing chart pattern.
Here, there was a price trend for 1 month where prices were trading in the ascending parallel channel.
But on the 13th of June, it changed its direction.
Impact of Breakaway gap?
It creates a strong resistance. When it occurs on the downside, the probability of the gap getting filled is very low because market participants become fearful and a chain reaction kicks in.
Whereas in an upside breakaway gap, it acts as support and there is a higher possibility of slight retracement because here participants become greedy and close their position.
How to trade it?
In the downside breakaway gap, consider the low of the previous candle as a point of exit and short the calls
In the Upside breakaway gap, consider the high of the previous candle as a point of exit and short the puts