Breakaway gaps mark the start of new trends. They gap out of a consolidation range or key resistance level with strong volume. Unlike common gaps, these don't fill and signal institutional commitment to a new direction.
- Stock has been consolidating (Donchian 20 range narrow) for 15+ days
- Gap up ≥ 3% opens above the consolidation high
- Opening volume ≥ 2× average daily volume
- First hour: does NOT fill the gap (holds above prior resistance)
- Enter long on end of day 1 OR next day open
- Stop: inside the gap (if filled, the breakaway failed)
- Target: measured move of the prior consolidation range (3R+ typical)
The volume requirement is critical. A gap without volume is just a low-liquidity overnight move that will often retrace. Volume ≥ 2× ADV signals institutional participation. That's what makes the gap 'stick.' No volume, no trade.