What makes a stock gap up or down at the bell?

Question

We all know that stocks gap up or down sometimes, but since there is minimal buying or selling while the market is closed what makes a stock close at $50.00 on thursday and open at $51.00 friday morning?

yes, Thank you for the answers, but these things only explain why there would be a rally after the open continuing where the stock left off the previous day, and it may shoot right up within seconds. I am talking about when the stocks' actual open price is gapped up.

question for "common sense". So what do the logistics of the gap look like. A stock doesn't just magically know where to open. Is the gap a result of an overabundance of limit orders set for $3.00?

Answer 1

There is 15.5 hours between Thursday's close and Friday's open. A lot of news bulletins are often released during that period. Investors have a lot of time to evaluate their positions and place orders that flood the market at the open. There may be minimal buying and selling. But there is a lot of positioning. (orders placed.) So opening gaps are often more a reflection of news releases than afterhours trading.

Also, many traders exit their positions near the close making that a more volatile period. A stock may have taken an unwarranted dip at the close.

Answer 2

Stock Gap Up

Answer 3

Perceived value can change in an instant.

An example of a down "gap" might be;
A stock closing at $10 may have news that they're going to be sued for 5x their annual sales. The company admits they made a major mistake.

At the opening buyers "perceive" the value at $3.00.
Sellers are willing to get rid of the stock at any price.... $3.00 sounds good to them. Result (in this sample)... a $7.00 gap down.

Hopes this helps.

Answer 4

An imbalance of buy and sell orders waiting to be executed at the open.