More Gaps to Fill

Back a few weeks ago, we posted some names that had "gaps" to fill in their charts [Jun 22: Gaps Filling and To Be Filled?] - James River Coal (JRCC) has filled its gaps, and we also listed Research in Motion (RIMM) and A-Power Energy (APWR) - here are updates on their progress; both of these of course would require a swan dive.

I found a few more as I scan charts - some in much more reasonable ranges; frankly there are quite a few out there, since we had so many pre-market "futures happy" purchase programs in April especially. If you have any, please let me know in comments and I'll add it to this chart (no penny stocks or sub $5 type of stuff) I actually want to be long some of these names at the bottom of their "gaps," if and when they get filled.

Sterlite Industries (SLT) - gaps all over the place, definitely a huge one in mid $9s and potentially a small one below $9

Starent Networks (STAR) - below $20; due to this gap I have cut back the position over time

HDFC Bank (HDB) - basically we have a 0.1% stake here; I almost shorted this Thursday; big gap down there at $80.


Woodword Governor (WGOV) - readers pointed this one out. It broke below the 200 day Monday morning and has a nice one to fill at mid $15s.

For those not familiar with "gap theory," it simply says that eventually all gaps are filled; I'd say from my experience this is true 98% of the time (with the caveat that some take years to fill, and we've been in a 10 year primary bear market!)

Disclosure: Long James River Coal, HDFC Bank, Starent Networks in fund; no personal position

Comments

[mikesa69:]

That RIMM setup sure looks juicy! Red shoots anyone?

Jul 07 10:59 AM

[TraderMark:]

They all look juicy

Mike, we are going with yellow weeds, rather than red shoots. Join the verbal movement.


On Jul 07 10:59 AM mikesa69 wrote:

> That RIMM setup sure looks juicy! Red shoots anyone?

Jul 07 11:33 AM

[tresspass:]

your statistically in error.

gaps are filled 70% of the time and they are mostly partial fills.

you're article is disingenuous to the max.

you lack a fundamental component to your POV at your reader's peril.

a true disservice.

trespass

Jul 07 11:54 AM

[TraderMark:]

wow, did you do a white paper to get to 70%?

I wrote "IN MY EXPERIENCE" - I am glad that explicit wording was able to lead you to believe I am disingenuous. Almost always in stocks I watch that gap gets filled, even if it takes a years - as I wrote also explicitly.

If you have a white paper or research study showing that with 70 years of research, 70% of gaps get filled, I'd be happy to begin using that as a future reference.


On Jul 07 11:54 AM tresspass wrote:

> your statistically in error.
>
> gaps are filled 70% of the time and they are mostly partial fills.
>
>
> you're article is disingenuous to the max.
>
> you lack a fundamental component to your POV at your reader's peril.
>
>
> a true disservice.
>
> trespass

Jul 07 02:11 PM

[connorport:]

Can you tell me how you find these gaps? i am a long time investor and bought APWR @ $3.50 when everyone else said to run. I'd like to see where we are headed on this one in particular. There's been a lot of up and down movement and comment on the stock. Am i right to assume using the basic metrix at a depressed level that we are looking at about $14 per share minimal by late 2010 to early 2011? This is figuring projected earnings with a multiple of 10X. What do you think?

Jul 09 01:00 PM

[TraderMark:]

I have all these stocks on my watch list and have owned (or do own) some, so I look at their charts pretty often.

Jul 09 03:03 PM

[Kelvin Schulle:]

TM,
what you saying basically market will crash again like in March. bears camp like to see that. otherwise stock will go higher from here. maybe 5% dip before next leg up. but if you watch these stocks and wait for march low again, you will miss the boat forever. dollar average, that is what you need to do. I believe you are pure momentum player i f I am not wrong.

Jul 09 03:39 PM

[TraderMark:]

What would be a crash to you? If we fall to SP 750 thats not a crash to me. S&P 500? Crash.

Trust me I'm ambivalent on stock direction; I try to make money both ways.

Most of my comments are about the real economy - if I could short the real economy that would be a different story. The Wall Street economy lives in parallel universes for long periods of time.


On Jul 09 03:39 PM Kelvin Schulle wrote:

> TM,
> what you saying basically market will crash again like in March.
> bears camp like to see that. otherwise stock will go higher from
> here. maybe 5% dip before next leg up. but if you watch these stocks
> and wait for march low again, you will miss the boat forever. dollar
> average, that is what you need to do. I believe you are pure momentum
> player i f I am not wrong.

Jul 09 04:11 PM

[connorport:]

Im not sure what kind of response that was. I just wanted to know how to find gaps. I understand you watch them and you have charts but how do you find the gaps?


On Jul 09 01:00 PM connorport wrote:

> Can you tell me how you find these gaps? i am a long time investor
> and bought APWR @ $3.50 when everyone else said to run. I'd like
> to see where we are headed on this one in particular. There's been
> a lot of up and down movement and comment on the stock. Am i right
> to assume using the basic metrix at a depressed level that we are
> looking at about $14 per share minimal by late 2010 to early 2011?
> This is figuring projected earnings with a multiple of 10X. What
> do you think?

Jul 09 04:22 PM

[DaveW:]

connorport,
i think there is a 'gap' in communication here. Mark answered your question, you simply have to look at charts to find the gaps. Most are products of a market surprise (e.g. earnings, news releases).

Regarding APWR, I believe there is also a head and shoulders pattern which suggests the gap will be filled sooner, rather than later (shown in linked chart).

img34.imageshack.us/im...

sometimes it IS best to run, not walk, to the exits to protect hard fought gains. good luck.


On Jul 09 04:22 PM connorport wrote:

> Im not sure what kind of response that was. I just wanted to know
> how to find gaps. I understand you watch them and you have charts
> but how do you find the gaps?

Jul 09 06:16 PM

[DaveW:]

Mark,
a couple more gaps to fill: AIPC, DRI

...and one that will be the 2% not filled, imho, DRYS at $30

Enjoy your articles, keep up the great work.

Jul 09 06:51 PM

[connorport:]

How does the 17% run up on APWR affect your projections? will the gap fill or is this one destined to move higher and stay?

Jul 10 02:43 PM

[TraderMark:]

No change. Those gaps take time, all I am saying is over time the gap will fill. Not "in 2 weeks it will fill"

APWR is dominated by daytraders. When the next swoon in the mkt happens daytraders have no interest is sitting around providing any floor in the stock. It will be abandoned and thats most likely when the stock fills that gap.

Today it got news, and the daytraders on a quiet day swarmed in since not too many names are up big. They will be gone soon. Rinse. Wash. Repeat.

WHEN APWR management can prove to be consistent and stick to their guidance maybe some institutional money of size and scale will come in and make this situation different.


On Jul 10 02:43 PM connorport wrote:

> How does the 17% run up on APWR affect your projections? will the
> gap fill or is this one destined to move higher and stay?

Jul 10 04:02 PM

[DaveW:]

Nice gain today! Do consider taking some off the table, overall market fundamentals are going from bad to worse as it questions it's own 'full recovery' pricing.


On Jul 10 02:43 PM connorport wrote:

> How does the 17% run up on APWR affect your projections? will the
> gap fill or is this one destined to move higher and stay?

Jul 10 05:59 PM

[connorport:]

You still cant ignore the numbers and projections. Right now or in the next 2-3 years they don't support those levels. I feel the pact with GE will keep the company moving in the right direction as this long time powerhouse knows how to release news and invest in solid businesses. I do think that APWR will move to higher ground as they are heavily invested in the right markets that are primed to push upward for the next 10-20 years.

Jul 13 10:03 AM

[connorport:]

APWR is dominated by daytraders. When the next swoon in the mkt happens daytraders have no interest is sitting around providing any floor in the stock. It will be abandoned and thats most likely when the stock fills that gap.

Im not seeing much abandonment going on here. If the earnings prevail then this theory will be the only thing that's abandoned. Unless the market crashes then trading at 2 or 3X earnings is not very conceivable.

Jul 27 03:56 PM