Exhaustion Gap

A gap that occurs in the price of a stock that has experienced a prolonged period of appreciation. The gap is believed to be a climax in the price of the stock,  signalling that the uptrend has probably come to an end. Usually the gap will be filled when the stock declines.

However, exhaustion gaps can only be defined as such after the fact. Many stocks in uptrends gap up repeatedly and continuing rising. It is imprudent to believe a gap after a long period of appreciation definitely signals an end to the uptrend as the stock price may continue rising. Trying to pick tops is like playing with fire, investor caveat.

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