RH (RH) (formerly Restoration Hardware Holdings) is trading sharply higher this morning. When the dust settles we will probably have a large price gap on the daily bar chart.
Let's see what the charts and indicators looked like as of Monday's close and see what sort of strategy makes sense.
(For more on RH, see Jim Cramer's "Restoration Hardware Is Still Poised for a Bigger Move")
In this daily bar chart of RH, below, we can see a strong uptrend covering the past 12 months. There are three upside price gaps - one in early September that is not filled, another one in the middle of November that is filled. At the end of March there is a gap that hasn't been filed.
History could repeat itself today with a large upside gap. Coming into today we can see that prices were above the rising 50-day moving average line and the rising 200-day line.
The daily On-Balance-Volume (OBV) line has been rising the past year telling us that buyers of RH have been more aggressive than sellers.
The trend-following Moving Average Convergence Divergence (MACD) oscillator is in a bullish mode above the zero line.
In this weekly bar chart of RH, below, we went back to 2013 to show how significant the gains above $110 look.
Prices are above the rising 40-week moving average line.
The weekly OBV line is bullish as is the weekly MACD oscillator.
In this Point and Figure, below, we can see an upside price target of $162.
Bottom line: RH is likely to open sharply higher Tuesday creating a "runaway gap" or "measuring gap". This kind of gap happens in an existing trend. Prices rallied from $85 to $120 or $35 before this gap and we could see prices rally another $35 after the gap. It is difficult to suggest a stop level or risk point so only experienced traders should go long looking for gains to the mid-$160's.