Profit from Market Gaps: How to Trade Smarter with Gap Analysis

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What if a simple pattern on a stock chart could give you insight into future price movements—even in uncertain markets? That’s exactly what market gaps can do. According to investor and mentor Mark Yegge, gaps act like magnets—pulling stock prices back to fill them over time.

In this post, we’ll explore:

What gaps are and how they form
Why gap psychology matters
The two main types of gaps
Real-world chart examples from Amazon, Netflix, and more
How you can use gaps to guide your covered call and investing strategy

What Are Market Gaps?

A gap occurs when a stock opens at a different price than where it closed the previous day. These can be:

Gap Ups: Open above the prior high
Gap Downs: Open below the prior low

Mark uses daily charts for his gap studies—not minute or hourly charts—since he’s focused on swing and longer-term trading, not day trading.

Gap Psychology: Why Do Gaps Matter?

Gaps often represent order imbalances:

A gap up means buyers outnumber sellers overnight.
A gap down signals more sellers than buyers.

These imbalances are often driven by:

Earnings announcements (e.g., Nvidia)
News events
Investor emotions like panic or FOMO

Mark likens gaps to magnets:

“You can break away from a magnet, but the closer you get, the more you feel its pull.”

Two Types of Gaps

Breakaway Gaps

These happen during powerful breakouts—usually on news or earnings. The stock gaps and keeps going without coming back to the original price… at least for a while.

Example:
Nvidia’s gap during an earnings report sent the stock soaring. But that gap is still visible on the chart—and may eventually get filled.

Exhaustion Gaps

These show up after a trend has run its course. Investors rush to take profits, and the stock gaps in the opposite direction, usually downward.

Example:
Netflix gapped down after a strong rally—signaling exhaustion and triggering profit-taking.

Gaps in Action: Real Chart Examples

Mark shares multiple charts to show just how frequently gaps get filled:

Amazon

Gap down at ~$114: Took several months, but it filled.
Breakaway gaps at ~$160 and ~$107: Still open—but likely to fill eventually.

GameStop

Known for wild moves, GameStop’s gaps almost always got filled—even down to the penny.

Macy’s

Several gaps (both up and down) eventually filled—some took weeks, others took months.

Super Micro Computer

A volatile stock with many gaps, nearly all of which were filled.

Netflix (Legendary Example)

Two gaps from 2022 took over two years to fill.
When they finally did in 2024, both were filled in the same week!

Key Takeaway: Gaps Get Filled

Not every gap gets filled right away—but most do over time. Some fill within days, while others may take months or even years.

Understanding where these gaps are—and how price interacts with them—can give traders a serious edge in:

Covered call strategies
Price-volume analysis
Chart-based investing

Life-Improving Tips for Trading Market Gaps

Use Daily Charts for gap tracking. They're ideal for swing and long-term trades.
Mark Gaps Manually on your charts so you don’t forget where they are.
Track Volume: High-volume gaps are more meaningful and likely to be revisited.
Combine Gaps with Price-Volume Analysis for stronger signals.
Use Gaps to Set Price Targets for entries, exits, or roll points in covered calls.
Be Patient: Some gaps take time to fill. Don’t force a trade based on timing.
Watch for Consolidation: Many gaps get filled after a sideways move.
Don’t Ignore Tiny Gaps: Even gaps of just a few cents can act like magnets.
Learn from History: Study past gap behavior in your favorite stocks.
Stay Emotionally Neutral: Treat gaps as data, not predictions.

Frequently Asked Questions (FAQs)

Q1: Do all gaps get filled?

No, but most do over time. Some may take years. Gaps act like magnets—but nothing is guaranteed in the market.

Q2: What’s the best chart time frame to analyze gaps?

Daily charts are ideal for swing and longer-term traders. Hourly charts may show too many noise-based gaps.

Q3: Can I use gap analysis in covered call strategies?

Absolutely. Knowing where gaps are helps you identify support/resistance zones and set better strike prices.

Q4: What’s the difference between breakaway and exhaustion gaps?

Breakaway gaps occur during strong breakouts. Exhaustion gaps happen when a trend ends and reverses.

Call to Action

Want to profit from market gaps like a pro?

Learn how to combine gap analysis with covered call strategies and price-volume patterns by joining Mark Yegge’s Cash Flow Machine program.

Visit cashflowmachine.io
Join his free insider tips newsletter for real-time insights and chart studies.

Get started today

Conclusion

Market gaps are more than just chart quirks—they’re powerful indicators of supply, demand, and market psychology. As Mark Yegge shows, gaps often act like magnets, drawing prices back over time and providing unique trading opportunities.

If you can master the patterns behind gap fills, you’ll add a valuable skill to your investing toolkit—and position yourself to profit consistently, even in uncertain markets.

Keep your charts sharp, your mind open, and your strategy gap-aware.

Profit from Market Gaps: How to Trade Smarter with Gap Analysis

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