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The Chartman

Watching the ‘Gaps’ Could Pay Off

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With all the guff market technicians take at times, it’s heartening when the charts work out exactly as predicted. Such is the case with the Dow, where last week I noted a previous resistance level and how hard it would be for the average to march forward.

As you can see from the chart below, I’ll sum up my new remarks with one word: ditto!

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This week I’ll steal directly from the front page of and look at two of the stocks in the headlines. It’s also a little primer on gaps and how I’d play them.

The first is Ford (NYSE:F), with both its earnings and dividend news.  You can see the gap down and while gaps are usually filled, it’s more of a trader’s game as post-fill the stock tends to slide right back down.  Most of you are longer-term in thinking and for that reason, I think Ford will eventually drop much lower.

However, if you are a trader like me you can often make some nice short-term gains by playing that exact gap.  I bought Google (NASDAQ:GOOG) upon the earnings news and will sell at price in that gap area.  However, and this is important: I’m also prepared for Google to drop further before I can sell and if so, will likely buy more.  In other words, I’m prepared to be an investor!

Next week some more stocks in the news!

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