Gap Down

A gap down is an open below the prior session's close, with no trades printed in between. Sellers absorbed overnight news — an earnings miss, an offering, a downgrade — and the first print of the day already reflects it.

Traders treat the prior close as the ceiling and the opening price as the pivot. If the stock reclaims the open and pushes toward yesterday's close, the gap is filling; if it loses the opening price on volume, the down move usually has a second leg. Gap downs on dilution news (a secondary offering priced overnight) tend to fill slower than gap downs on sentiment alone.