Gap, Inc. (GPS) was reviewed in June when I wrote that "Traders could buy GPS on any weakness towards $30 risking a close below $28. On the upside the $38 area is our price target from our Point and Figure chart. $45 is our potential secondary price target." Traders got a dip to buy and prices have not come near our stop loss level so longs should be in the black. Let's check the charts for any new clues to the direction of prices ahead of earnings.
In this daily bar chart of GPS, below, we can see that prices are back above the rising 50-day moving average line and the bullish 200-day moving average line. While prices have seen a lengthy decline from from January to the end of May the daily On-Balance-Volume (OBV) line only shows a sideways pattern and overall shows a positive trend the past twelve months. The daily Moving Average Convergence Divergence (MACD) oscillator turned up above the zero line this month for an outright go long buy signal.
In this weekly bar chart of GPS, below, we can see a base pattern over the past three years. Prices are now above the rising 40-week moving average line. The weekly OBV line is positive from May 2016 to February of this year. Since February of 2018 the OBV line has weakened suggesting that sellers of GPS have been more aggressive. In the lower panel the weekly MACD oscillator has been hugging the zero line so a buy or a sell signal will happen soon enough.
In this Point and Figure chart of GPS, below, we can see an upside price target of $38.66 which would be an upside breakout on our weekly bar chart (above).
Bottom line strategy: Fingers crossed that the earnings report does not derail the bullish-looking charts. Traders can continue to hold longs looking for our $45 price target. Risk a close below $30.