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Games Workshop Group gap break higher catches the eye...

The upbeat Q3 earnings figure and dividend announcement on 15 September 2023 gave Games Workshop shares a boost, which led to a gap higher open on the daily chart (below, top). Chartists have different readings on how to analyse and trade gaps, with most of the best analysis done on historical moves. In other words, it is far easier to spot island gaps, breakaway gaps, runaway gaps and exhaustion gaps when you are looking at previous price action. One thing that chartists always look for is whether the gap is filled, closed or left open. Filled is when subsequent sessions see prices retreat (in the case of a bullish gap) and trade to the previous close, filling the gap. Closing the gap means that a close is seen at or below the lower boundary of the gap, in this case, the closing price of 14th September near 10,390p.

The current gap higher is seen as setting up a test of the July 2023 high near 11,850p, ahead of the big price peaks from late 2020 through 2021 at the 12,200/12,300+ area. Gap support is at the 11,150p area (Friday's open) ahead of 10,390p (Thursday’s close). If the gap remains unfilled/open this will give a supportive signal to chartists.

Context is always important, so looking at the long term weekly chart (below) can be helpful. The weekly chart is on a semi-log scale, to show percentage moves which is more useful for long term analysis. Of note is the big break higher in 2017. For those not familiar with the share, this broke the back of the trading strategy of buying dips below 200p or so and selling above 800p or so which had provided money to some trading fans to buy more fantasy gaming figurines (which is part of what GAW sells). This led to a big rethink of fear and greed. Pay ‘new highs’ or wait for a pullback? Some ended up doing both, taking the view that the chart breakout may extend, which it did.

The current rally from the late September 2022 low has been boosted by a few events. The news that Henry Cavill, bounced off the Superman set and facing his last outing on the Witcher series would be indulging his GAW hobby by appearing in a Warhammer film gave the share a 1,000p+ boost in December 2022. What now? Chart fans will be watching the resistance zone above 12,300p (top line). Sustained gains above this line would shift chart outlooks to 18,700p on a simple extension from the 5,565p lows to the 12,300p area highs from the breakout zone (12,300p+). This is clearly far too bullish, right? But, hope springs eternal after all. Key sessions are ahead, the gap break higher last week is encouraging, see if gap support holds.

Gerry Celaya

Chief Strategist


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