What Makes This Trade Great: Analyzing GPS’s Earnings Play

What Makes This Trade Great: Analyzing GPS’s Earnings Play

May 31, 2024

Hello, Barrie Einarson from Trade Ideas with today’s edition of “What Makes This Trade Great.” Today, we’re diving into the recent performance of GPS (The Gap Inc.) following their earnings report.

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GPS presented itself as another intriguing earnings play, similar to other retailers earlier this week. Initially, when I saw the gap (no pun intended), I anticipated a potential run right from the market open. However, the market had other plans.

At the start, GPS gapped up, catching the eye of many traders. Observing the 10-minute candlestick chart, there was a notable pullback around the 9:20-9:30 AM mark. This initial pullback could have been discouraging, but patience was key here.

Despite the early hesitation, the alert at $27.03 indicated a significant pullback. For those cautious about the overall market trend, waiting paid off. The market’s downward trajectory could have made anyone wary of taking long positions. However, about an hour into the trading session, GPS began a solid upward trend.

It’s also worth noting the performance of XRT, the retail ETF. Unlike other sectors, XRT managed to hold its ground relatively well, which bolstered confidence in retail stocks like GPS. Similarly, another earnings play, AMBA, showed a similar bottoming tail pattern, yet the sector it belongs to (as seen in SMH) was struggling, making long positions in such sectors risky.

Ultimately, GPS performed exceptionally well post-earnings, validating the cautious yet optimistic approach. This case exemplifies the importance of timing and sector performance in trading decisions.

In summary, GPS’s earnings play highlighted the benefits of patience and sector analysis. Despite an initial pullback and a cautious market environment, waiting for the right moment proved rewarding. As always, keep a close eye on sector trends and individual stock performance to make informed trading decisions.

Have a great weekend, everyone, and we’ll see you Monday morning! Don’t forget to sign up and save on an annual subscription Here