Charts, page-3680

My take on gaps.
Gaps have more meaning after events or to be more specific when the chart takes on a new consolidation character after a large move (I tend to refer to impulse moves in my posts).

Gaps are a part of the fair value family (not my terminology or concept) where price has moved quickly and not done sufficient trading at that level. Price often comes back and closes these gaps (by trading at these levels) before moving in the direction of the predominate direction.

Admittedly this is something I've been studying with a great deal of frustration for the last couple of years as part of my futures trading. It comes from algorithmic programming for buying and selling operations. It is more useful in highly liquid markets but you can see the concept play out and use it to fine tune entries in the lower time frames. With a deeper understanding you can make some educated guesses (or use the behavior as a part of your signal weighted model as I try to) as to what's coming next - impulse move, consolidation, pull back before continuation etc.

Look at gaps in relation to what the stock has done and the higher time frame is the parent time frame.