Gaps are not just empty space on a chart. They are moments when supply and demand fall out of balance, forcing price to rapidly reprice.

In Senior Market Strategist John Rowland, CMT’s recent webinar on Gap Theory, the focus is on one of the most powerful — and misunderstood — gap types: breakaway gaps.

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These are the gaps that matter because they often mark the start of a new trend, not the end of an old one.

What Makes a Gap a “Breakaway” Gap?

Not all gaps are created equal.

Most daily gaps fall into a routine range — typically 0.5% to 1.5% — which reflects normal market noise. Breakaway gaps stand out because they “break away” from that structure.

A breakaway gap is defined by three core traits:

Price gaps out of a defined range or consolidation

The gap occurs alongside meaningful price displacement

It appears early in a potential new trend, not after an extended run

That’s why context matters more than the gap itself.

John starts with one of the most underutilized tools on the site:

Stocks → Performance Leaders → Gap Up / Gap Down

This page instantly shows stocks that have gapped during the current session. On active days, that list can include hundreds of candidates, so the real edge comes from screening.

To isolate potential breakaway gaps, John layers in time-based structure and price significance.

He filters for:

New monthly highs

Made during today’s session

This ensures the gap is not just noise, but a move into new price territory.

John looks for gaps of 2% or more, because:

Smaller gaps often fade

Larger gaps signal real imbalance

For higher-volatility stocks, he suggests comparing the gap size to Average True Range (ATR % of price) to ensure the gap is proportional to the stock’s normal movement.

For clarity and tradability, John removes:

ETFs

OTC names

Non-common shares

What’s left is a focused list of individual stocks showing unusual price behavior worth investigating further.

Breakaway gaps tend to occur:

Early in a trend

After price compression

Before momentum is fully recognized

That’s why they are often followed by:

Trend continuation

Expanding volume

Strong follow-through

But they still require confirmation — gaps are signals, not strategies on their own.

John’s process isn’t about predicting outcomes. It’s about putting probability on your side.

Instead of scanning charts one by one, this approach:

Lets the market surface opportunity

Uses objective filters to reduce noise

Keeps traders aligned with price, not opinion

That’s the real power of combining Gap Theory with structured screening.

Stream the full webinar to learn how to trade gaps from continuation to exhaustion

Turn on notifications so you don’t miss the next live free webinar with John Rowland

On the date of publication, Barchart Insights did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com