A breakaway gap occurs when the price gaps above resistance or gaps below support. Support or resistance, in this case, is often associated with a chart pattern, such as a trading range, triangle, wedge
, or other patterns. Breakaway gaps often occur early in a trend and show conviction in the new trend direction.
How To Trade A Breakaway Gap?
The market moved sideways, forming a consolidation pattern.
Enter a long position at the breakaway gap day close.
These are possible initial stop-loss levels for this breakaway gap setup.
You can then use this subsequent swing low to tighten your stop-loss.