CNBC Television
Fairlead's Katie Stockton talks stock gaps and what they signal
11/5/2025, 1:42:31 AM
Economic Summary
- A gap occurs when a stock opens above or below the prior close, leaving a price vacuum that can act as support or resistance and often appears around earnings or news.
- There are two gap types: breakaway gaps (potential continuation if they hold) and exhaustion gaps (if filled quickly, they signal a failed move); examples include ORCL and MSFT showing exhaustive behavior.
- Gaps can be informational and tradable; for example, AMZN's post-earnings gap lifted to new highs and, if its gap-based support holds, could be a positive market-sentiment indicator.
Bullish
- Breakaway gaps that hold act as support and can signal continuation.
- Amazon (AMZN) leaving a gap after strong earnings could be bullish if gap-based support holds.
- Gap fills from a downside gap can indicate an oversold rebound (example: WING).
Bearish
- Gaps that are penetrated within days often indicate exhaustion and a negative development for the stock.
- Earnings-driven breakaway gaps that quickly reverse suggest the move was overdone and weak (examples: ORCL, MSFT).
- After a big move, re-entering immediately can be risky if the gap proves unsustainable.
Bullish tickers
AMZNMETAWING
Bearish tickers
ORCLMSFT
ORCL
Bearish
Earnings gap that was penetrated the next day, suggesting an exhaustive gap and negative development.
MSFT
Bearish
Experienced an exhaustive post-earnings gap that was filled, indicating weakness in the move.
META
Bullish
If price comes back up into its gap, it indicates the gap was overdone and can be bullish.
WING
Bullish
Gap down into support that filled within days, suggesting a possible rebound and that the move was overdone.
AMZN
Bullish
Strong earnings reaction lifted AMZN to new highs and left a gap; holding that gap-based support would be positive for sentiment.
Bearish
If the post-earnings gap is later filled, that would be a negative signal.
People mentioned
Katie Stockton