Exhaustion Gap

An exhaustion gap is a price gap that occurs near the end of a trend, signaling that the move has run out of steam and a reversal is imminent. Unlike breakout gaps, which signal the start of a new trend, exhaustion gaps appear when the market is overly extended, often accompanied by extreme volume.

This indicates that the last of the buyers or sellers have entered the market, leaving no one left to push the price further. In financial derivatives, these gaps are often followed by a period of consolidation or a sharp reversal.

Recognizing an exhaustion gap requires analyzing the context of the trend and the volume profile, as it is a high-conviction signal that the prevailing momentum is about to collapse.