The Gap, Inc. operates as an apparel retail company worldwide. It provides apparel, accessories, and personal care products for men, women, and children under the Gap, Banana Republic, Old Navy, Athleta, and Intermix brands. The company’s products include denim, tees, button-downs, khakis, and other products; and fitness and lifestyle products for use in yoga, training, and sports to women and girls.
Take a look at the 1-year chart of Gap (NYSE: GPS) with the added notations:
GPS has managed to bounce on top of a $22 support (green) several times during the most recent 4 months. Now that the stock has started to roll back down towards that support again, traders should be able to expect some sort of bounce. However, if the $22 support level breaks, lower prices should follow.
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The Tale of the Tape: GPS has a key area of support at $22. A trader could enter a long position at $22 with a stop placed under the level. If the stock were to break below the support, a short position could be entered instead.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT
Follow me on Twitter: @cmtstockcoach