There’s an old saying on Wall Street that "gaps refill." It's true and it may be about to happen to shares of ChemoCentryx, Inc. CCXI.
There’s a logical reason why this happens.
Support and demand can form because of investor remorse. Remorseful sellers try to buy their shares back. These buy orders can create support.
When a stock makes a big move and spends little or no time at the price levels it moves through, it appears as a gap or a space. Because so few shares trade, there isn’t enough time for sufficient sellers remorse to create a meaningful amount of buy orders.
This means when a stock reverses and gets back to a gap, there's a good chance that it falls back through. There won’t be a significant amount of buy orders to hold it up.
In December 2019, CCXI gapped higher. Then in May, it fell back through this gap. Now shares have gapped up once more.
Traders are watching this closely. If the stock starts to head lower there’s a chance it could quickly fall through this gap as well.
The learn more about chart reading, please check out the Benzinga Trading School.
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