Chartered Market Technician (CMT) Practice Exam 2026 - Free CMT Practice Questions and Study Guide

A Breakaway Gap typically indicates a strong trend continuation in a trading context. This type of gap occurs when the price of a security moves sharply upward or downward, creating a gap in the price chart that signifies a clear departure from the previous trading range. Breakaway Gaps are often formed at a significant price level, such as a support or resistance point, during a period of high trading volume.

The presence of a Breakaway Gap suggests that there is strong momentum behind the price movement, which reflects the underlying market sentiment. Traders interpret this type of gap as a signal that the prevailing trend—either upward or downward—is likely to continue, as the market participants are actively buying or selling at the new price levels, reinforcing the trend.

In contrast, price consolidation typically refers to a period where the price moves within a narrow range, indicating a lack of decisive movement. Market indecision suggests uncertainty among traders, often leading to sideways price action rather than strong trends. A reversal in price trend indicates a change in direction rather than the continuation implied by a Breakaway Gap. Thus, the characteristics of a Breakaway Gap align perfectly with the concept of trend continuation, making this the correct interpretation in a trading context.