| Exhaustion gaps burn out rallies and selloffs with one last surge of emotion. They print after trends and oscillators appear to reach extremes. This last burst can occur on very high volume, but a lack of participation does not negate the pattern. Exhaustion gaps fill easily and warn that a trend has ended. Price mechanics fill the gap and often retest the hole from the other side, before it proceeds in the closing direction. Congestion patterns may also form through wide gap ranges before yielding to a new trend. The exhaustion gap may turn out to represent a hidden continuation gap in the next larger time frame. This odd phenomenon requires a sharp eye and often does not display until the larger trend ends. Use Dark Cloud Cover or Bearish Engulfing candlestick patterns to uncover these dual gap candidates. |
