Working Money magazine.  The investors' magazine. Advantage



Article Archive | Search | Subscribe/Renew | Login | Free Trial | Forgot ID?



Gap Continues Lower

06/28/06 10:52:16 AM
by Arthur Hill

Gap Inc. looked like it was basing a few months ago, but a recent support break signals a continuation of the long-term downtrend.

Security:   GPS
Position:   Sell

Let's start with the weekly chart for some perspective (Figure 1). The stock declined sharply in July–August 2004 (gray box) and then formed a big triangle consolidation. It was two to three months down and then 11-12 months flat in the triangle. The stock continued lower with a support break in August 2005 (red oval) and bottomed in October. It was another two- to three-month decline and then an eight- to nine-month consolidation unfolded (second triangle).

FIGURE 1: GAP, WEEKLY. This stock dropped in the July–August period (gray box) and then formed a triangle consolidation.
Graphic provided by: MetaStock.
It now looks as if this consolidation has ended, as GPS signaled a continuation lower with a move below the lower triangle trendline and April low. The downside target is around 14 over the last two to three months. I found this target by drawing a falling price channel and extending the lower trendline into September.

There are bearish developments on the daily chart, too (Figure 2). Gap Inc. broke the lower triangle trendline with a sharp decline below 17.5 (gray oval). A flat flag then formed, and this is a continuation pattern (blue lines). A move below the flag low (17.2) would signal a continuation lower and target a move to around 16.5.

FIGURE 2: GAP, DAILY. The bearish consolidation could also be seen in the daily chart.
Graphic provided by: MetaStock.
The flag also established resistance just below 18 and this gives the bears a point to be wrong. Failure to move lower and a break above 18 would show resilience and negate this bearish prognosis.

Arthur Hill

Arthur Hill is currently editor of, 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 and the main contributor to the ChartSchool.

Title: Editor
Address: Willem Geetsstraat 17
Mechelen, B2800
Phone # for sales: 3215345465
E-mail address:

Traders' Resource Links has not added any product or service information to TRADERS' RESOURCE.

Click here for more information about our publications!

Comments or Questions? Article Usefulness
5 (most useful)
1 (least useful)


Date: 06/28/06Rank: 4Comment: 

S&C Subscription/Renewal

Request Information From Our Sponsors 

DEPARTMENTS: Advertising | Editorial | Circulation | Contact Us | BY PHONE: (206) 938-0570

PTSK — The Professional Traders' Starter Kit
Home — S&C Magazine | Working Money Magazine | Advantage | Online Store | Traders’ Resource
Add a Product to Traders’ Resource | Message Boards | Subscribe/Renew | Free Trial Issue | Article Code | Search

Copyright © 1982–2021 Technical Analysis, Inc. All rights reserved. Read our disclaimer & privacy statement.