EIH Ltd (CMP 407.50)- Update. EIH ltd came up with good Q3 earnings and the stock price gapped up almost locking in upper circuit, this gap up opening is also known as a “runaway gap” which is new to me as I am also learning. The same is explained below and shown in the image below.
Runaway gaps are also called measuring gaps, which are caused by increased interest in the stock. For runaway gaps to the upside, it usually represents traders who did not get in during the initial move of the uptrend and while waiting for a retracement in price, they decided it was not going to happen.
There is increased buying interest all of a sudden and the price gaps above the previous day’s close. This type of runaway gap represents an almost panic state among traders and a good uptrend can have runaway gaps caused by significant news events that cause new interest in the stock. There is a significant increase in volume during and after the runaway gap.
It will be interesting to see how this Runaway gap plays out.
Disclosure : Invested in EIH Ltd. (not a recommendation, anyone contemplating investing needs to do their own diligence).
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