There is an old adage on Wall Street that all gaps will be filled. Gaps occur for a variety of factors, but all 3 of the examples we will look at were caused by earnings reports. When a gap is filled and holds it can often lead to a very profitable opportunity. Lets look at some recent cases and how they worked out.
In our 2/23 Game Plan we looked at QSR. The stock is on a 6 session winning streak and today displayed solid relative strength on a weak tape. It rose more than 5% last week while the S&P 500 rose 1.6%. The space has some solid peers with PNRA near all time highs and CBRL higher by 17% YTD. Below is exactly how we profiled the name in our nightly report.
Stocks that can be filled after gap fills are QSR. QSR is the merger of the old BKW and THI which now resides in Canada and is lower by 12% YTD and 21% over the last one year period and sports a dividend yield of 1.7%. Earnings have been on a roll with 3 straight positive earnings reactions of 5.6, 4.2 and 3.5% on 2/16, 10/27 and 7/27 after a decline of 2.4% on 4/27. The stock has recently found support at the round 30 handle between 2/9-11 (no CLOSES underneath) and that week ending 2/12 recorded a bullish hammer candle finishing 10% off intraweek lows. Looking back that number was important as there were only 2 weekly CLOSES below 30 the weeks ending 10/10-17/14 since taking it out with a huge weekly gain the week ending 8/29/14 of 18.2%. Look to enter on a gap fill from 2/12 at 32.15.