GW Pharmaceuticals plc (NASDAQ: GWPH)
GW does research and development within cannabinoid medications and it’s chart is showing us one of my favourite setups - the gap fill. There is nothing more satisfying than finding that perfect gap and then filling it. OK now, wait a minute. What is this gap fill you speak of? Simply put a gap fill occurs when the price from one time period (typically a day) opens up higher or lower than the previous day's trading range and continues to move away from that previous day’s trading prices. The theory behind the gap is that the prices will eventually return to the levels they occupied before the gap. Gap fills can be a self fulfilling prophecy, whereas traders spot them and just the prophecy alone is enough to drive the prices in the direction provided the gap is not too far out of reasonability. So if a gap occurs based off of extremely good or bad news/financials - don’t consider them for your gapfill plays.
What makes this gap all that more attractive is the range the prices have been trading in after the gap down settled. Notice the two lines I have drawn on the chart. This shows you the general direction the prices are heading. This is similar to what we discussed above with Canopy. Can you guess where the candles of GW are headed? That’s correct, they are headed to fill the gap that was created. It would be nice to see the trend continue as is until the gap is fulfilled, but that is not always the case. We may very well see some resistance and then support tests on the moving averages before this all plays out. Happy gap filling!
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