A gap is an area on a price chart in which there were no trades. Normally this occurs between the close of the market on one day and the next day's open. Lot's of things can cause this, such as an earnings report coming out after the stock market has closed for the day.
March 13 2014: Chairman N.R. Narayana Murthy told investors annual sales growth may be at the lower end of its projections and lag behind industry forecast.
Impact: A Big Gap down Opening near 3410-3439 in Infosys stock on March 13 2014.
Here's the Infosys Daily Chart
The sentiment changed dramatically for Infosys stock. Then, there was follow through selling all the way to 2900-2950. Interestingly, this coincided with turnout levels of 2950-2995. The stock then turned around and made a good bullish journey back to 3400 - the gap down high. The stock formed a small resistance at 3400 which it finally broke past it in early August. This resulted in more rally and eventually stock filled the Gap at 3630, a good 23% move from lows of 2950.
Technically, stock has achieved the target. Ideally, there should be profit booking here and some adventerous shorting here. Any bullish move above 3630 may puzzle lots of people. If stock continues with upmove, then it would mean Infosys trying to target all time high of 3850. We will see what happens next
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers