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Fall Into The Gap (GPS)

Fashion is fickle...but all signs point to continued strength in GPS


I’m old enough to remember when Gap, Inc. (GPS) first started using its iconic tag line, “fall into the Gap.” In fact, I still can hear that catchy little descending scale melody in my head. The jingle has stuck with me, and ever since my youth I’ve always kept an eye on the company to find out the latest trends in mainstream fashion.

As an adult whose main task in life is to identify and write about investments, I still listen to the buzz on the street from Gap, and what I’ve been hearing from colleagues on the NYSE trading floor lately is its own type of catchy bullish melody. Over the past four weeks, GPS shares are up nearly 9% (as of midday Friday). That bullish move is accented by today’s near-3% spike.

Why so much love for Gap in the trading pits?

Well, as one trader buddy of mine told me, “This stock is on fire. Gap seems to be the go-to store this summer for the kids and for teens, and that’s always the key in the fickle retail space.”

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I guess it’s no surprise that GPS shares are doing well. Fundamentally speaking, the company has seen strong earnings growth in recent quarters, and in its most-recent quarter Gap posted a year-over-year net income increase of 42.9%.

Technically speaking, the shares continue trading with strong upward momentum. The chart here shows the late-February breakout in the stock that sent GPS above its 50- and 200-day moving average. Since then buyers have piled in to the Gap in droves, and there’s nothing I’ve heard or seen on the near-term horizon that threatens to derail this bullish train.

If you’re looking for a good momentum play with the potential for another 10-15% upside over the hot summer months, then now’s the time to fall into the Gap.

At the time of publication, Jim Woods did not hold a position in any of the stocks mentioned here.

Article printed from InvestorPlace Media,

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