Runaway or measuring gaps are a familiar sight on technical charts. They are also otherwise known as continuation gaps. Following a breakaway gap the price-move begins to progress for awhile, somewhere in the middle of the move the price jumps forward to shape another gap or a sequence of gaps called the runaway or measuring gap. Gaps that are caused by increased interest in the stock.These gaps occur when the up or the down-trend is fairly well established. Sharp increase or decrease in investors’ interest in a stock results in the formations of such patterns.
The upside runaway gap is formed by the trader who did not buy during the initial move of the trend and was waiting for the stock price to come down.
As the realization of these expectations appear increasingly remote, a sudden increase in buying interest (as the trader gets in a state of panic), pushes the stock price much higher with an upside gap.
Such gaps can also be formed by a significant news event pushing the stock price up or down.
Runaway gaps act as support in the market. When the stock price corrects, the decline gets support in the area of the gap and a rebound is likely to occur from there.