The phrase “Gaps refill” is a well-known concept on Wall Street, and it’s rooted in understanding trader and investor psychology. It might be about to unfold with Intel Corporation (INTC) shares.
One of the key reasons resistance forms in a market is buyer remorse. Investors purchase a stock, only to regret their decision when the price starts heading down. Many of these disappointed traders decide they want to sell, but they don’t want to lose money. They hold onto their positions, hoping to get out at breakeven by selling when the price returns to their initial purchase price.
This explains why former peaks tend to act as resistance levels. Investors who bought at the top of the initial peak often try to sell when the stock retraces back to that level. If enough of these sell orders accumulate, it creates resistance. Similarly, support levels can also transform into resistance if the support breaks. Those who bought before the break will attempt to sell if the stock rallies back to their purchase price. A significant number of these remorseful buyers placing sell orders could turn what was once support into resistance.
When a stock closes at one price and opens at a different price, it appears as a blank space or ‘gap’ on the chart. There’s no trading at the prices the shares gapped through. In Intel’s case, it gapped down in early August. Since there was no trading at those prices, there are no existing buyers at those levels. This implies that if the shares reverse and start moving upwards through the levels they gapped down through, there might not be many sellers willing to part with their shares. Consequently, buyers would need to pay successively higher prices to acquire shares, potentially pushing the stock rapidly higher through the price level where the gap occurred.
This ‘gap refill’ scenario could be about to play out with Intel. The lack of sellers at the gapped-down levels could provide an opportunity for buyers to drive the price back up. Investors should monitor Intel’s price action closely to see if this scenario unfolds.
