Gap (GPS) was swept higher last week as formerly downtrodden retailers rode a wave of buying enthusiasm higher. GPS made a small gap to the upside Thursday, but volume did not reach levels to break out of the atmosphere.
Today the stock is in a position to challenge resistance from March around $30; breaking above that area will complete the basing pattern.
Let's look closer at the charts and indicators.
This daily chart of GPS is a potential turnaround in progress. Prices have been trading sideways for most of the year, but there is a shift in early September as the 50-day moving average rallied and closed above the 200-day average line. This moving average crossover is commonly called a golden cross and is a bullish signal.
As prices gaped (no pun intended) to the upside in early October, we see the slope of the 50-day average turn positive. The slower-to-react 200-day average line is now also positive. The On-Balance-Volume (OBV) line is a great way to confirm an uptrend, and it has moved higher since May, making a new high for the move up last week.
The Moving Average Convergence Divergence (MACD) oscillator crossed to a new buy signal last week. GPS is trading around $30 this morning, but it remains to be seen if prices can close above the resistance and whether volume expands sharply.
We can see a number of bullish technical clues in this three-year weekly chart of GPS, above. Prices are above the 40-week moving average line, which just turned positive. The weekly OBV line rose strongly into July, but has not matched the price gains since.
The weekly MACD oscillator moved above the zero line last month for an outright go long signal. If GPS can close above the $30 area the next upside price target becomes the $38 area.