The last of the classified types is called an exhaustion gap because it occurs near the end of the move to signal a last push toward new highs or lows. It is sometimes to difficult to identify this type of gap because it appears in a trending market just like a continuation gap. Price action in the days immediately following the gap help the analyst determine which kind of gap it was. Whereas continuation gaps are following by a continuing strong trend, exhaustion gaps are followed by more congested, sideways market action. Such signals as one-day reversals help identify which gap has occurred.
Prices usually trade back to fill the gap and when they do, it is a good sign that the move is over.
The smart money uses this activity to take profits, leaving only the weak participants left to try to push the market further. If the relative numbers of weak participants is high, those last minute buyers or sellers quickly reverse their positions to cause a gap in the opposite direction. The shape of the gap, congestion and reverse gap looks like an island surrounded by water. This sort of pattern usually signals a strong change in trend. These types of gaps occur within price patterns or congestion zones and are the least meaningful of all gaps.