Price gaps -- or price voids -- are not strangers to the chart of apparel retailer Gap (GPS) . Several bullish and bearish gaps can be spotted in the past year, but a recent downside reversal may mean a weak first quarter. Time to check the charts and indicators.
In this daily chart of GPS, above, we can see gaps to the downside and upside along with sharp increases in volume. Let's look closer at the gaps since November.
GPS gaps lower around mid-November and volume rises to around 30 million shares. Prices decline to break below the 50-day moving average line and, in early December, a test of the declining 200-day moving average. Prices rebound for a few sessions and then resume their decline.
We decisively close below the 200-day average and then, on Wednesday we gap up above the line. The gap does not have any follow-through buying and GPS gaped lower today. Wednesday's price action looks like a one-day island reversal. The On-Balance-Volume (OBV) line peaked in November and its new decline tells us that sellers of GPS have become more aggressive.
A number of the technical indicators on this weekly chart of GPS, above, are bearish. Prices are likely to close below the declining 40-week moving average line tomorrow (Friday). The weekly OBV line peaked in July and signals liquidation of positions after the rally earlier in the year. The weekly Moving Average Convergence Divergence (MACD) oscillator is crossing below the zero line for an outright sell signal.
Bottom line: The charts and indicators on GPS are bearish and a close below $21.50 is likely to precipitate further declines toward $18.