I have received a few good questions this week regarding the way that I draw a Gap Fill on some of my charts. Usually a box is drawn on a chart to show consolidation or a “Basing” action with price, but I also use it show the space in price during a Gap up or down. Here is a good clean example of a Gap Fill play that I am trading in NKE (Nike Inc CL B):
As you can see in the chart above, I have drawn a box in between the price for the Gap down move on 3/18/2011. Price did a brief sideways action before slowly drifting up in to the box to fill the Gap. Now price is meeting with Resistance at the top of the box and you have major Moving Average congestion (noted at the arrow). A battle here is ensuing between the bulls and the bears for sure.
Mind the gap.