Gap (GAP) shares soared in extended trading Thursday after the apparel retailer reported stronger-than-expected third-quarter results and raised its sales outlook.

The company now anticipates fiscal 2024 sales to grow between 1.5% and 2% compared to its earlier guidance of “up slightly,” as the retailer continues to make progress executing a turnaround plan under CEO Richard Dickson. The retailer said the holiday period has started strongly.

Gap Shares have gained around 5% since the start of the year through Thursday’s close, significantly trailing the S&P 500’s return of about 25% over the same period. The stock jumped 16% in after-hours trading Thursday to $25.50.

Below, we take a closer look at the technicals on Gap’s weekly chart and identify important post-earnings price levels that investors may watching out for.

Descending Triangle Breakout

Since reclaiming the 200-week moving average, Gap shares have traded within a descending triangle. Although chart watchers typically consider this pattern to predict lower prices, it can also signal a bullish continuation move if formed within an uptrend, which is the case on Gap’s chart.

Indeed, the stock looks set to stage a decisive breakout on Friday.

Let’s analyze Gap’s chart to identify several key overhead price areas to track and also outline a crucial long-term support level worth monitoring.

Key Overhead Areas to Track

Firstly, it’s worth keeping an eye on the $27 area. Investors who have purchased the stock during its recent consolidation phase may look to offload shares near a multi-year horizontal line that joins a range of similar trading levels on the chart between April 2017 and June this year.

A volume-backed breakout above this level could see the shares climb to around $36, a region on the chart that would likely attract selling pressure near prominent peaks in January 2018 and May 2021.

Investors can project an overhead price target above this area by using a bars pattern, a technique that provides insight as to how a bullish longer-term continuation move in the stock may play out. 

We apply the tool to Gap’s chart by taking the trending move that preceded the descending triangle from May to December last year and reposition it from the pattern’s lower trendline. This projects a target of around $52, a potential area where investors may decide to lock in profits.

Crucial Long-Term Support Level to Monitor

During periods of weakness in the stock, investors should monitor the $20 level. Investors may view this area as a buying opportunity near the descending triangle’s lower trendline, with the location also finding a confluence of support from multiple peaks and troughs on the chart from mid-2019 to November this year.

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As of the date this article was written, the author does not own any of the above securities.