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Is Gap Headed for a Hard Fall?

by Jon Lewis 05/14/09

Following the bearish momentum of the past week, I'm taking up the case against retailer Gap (GPS), which is set to report earnings on May 21.

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GPS dropped below its 20-day moving average Wednesday. The stock hasn't closed a day below this trendline since March 11, which makes that plunge all the more noteworthy.

The problem with GPS is that there's a huge "gap" down to the next level of support, which turns out to be the 50-day moving average at around $13.90.

That's about 9% below current levels. It's also in the neighborhood of a 50% retracement of the rally from the March low to last week's high.

To simplify matters for those who eschew the technicals, the stock has plenty of room to fall.

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