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GAPS


Citrix Holds The Gap

03/08/07 01:54:23 PM
by Arthur Hill

Despite a setback last week, Citrix is holding its January gap and traders should watch the current consolidation for the next signal.

Security:   CTXS
Position:   Hold

Gaps are important chart features, but a lot depends on what happens after the gap. The ability to gap up is positive and the ability to hold the gap is even more positive. The ability to follow through and move higher after a gap is mostly bullish. Failure to hold a gap negates any positive effects from the gap and calls for a reassessment of the situation.

Citrix (CTXS) gapped up on January 24 and held it for over a month. The move was preceded with a high-volume advance and followed with a consolidation (magenta trendlines). This consolidation represents a rest after the move and I am watching the boundaries for the next signal.

FIGURE 1: CITRIX. CTXS gapped up late in January and held the gap for over a month.
Graphic provided by: MetaStock.
 
The stock appeared to break out on February 23 but fell back immediately and tested support over the last few days. Support around 31 has held for the most part and a move below 30.5 would be quite negative. Such a move would start filling the January 24th gap and represent a follow-through failure. An upside breakout, on the other hand, would show follow-through and I would then expect a move toward the upper 30s.

In addition to the consolidation boundaries, the stock is also caught in a moving average sandwich. CTXS broke above the 50-day moving average with a sharp move in January and the 50-day turned up a few weeks later. The rising 50-day moving average marks support just above 30. The falling 200-day moving average offered resistance in late February and the stock is trading just below this moving average. Something has to give pretty soon, and I would not ignore the next moving average break.



Arthur Hill

Arthur Hill is currently editor of TDTrader.com, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for Stockcharts.com and the main contributor to the ChartSchool.

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Date: 03/09/07Rank: 4Comment: 
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