The Hornets have been monitoring the Argentina international’s situation in the Spanish capital since the summer but made little progress on a deal with Atletico before the window shut.
The Watford Observer have reported that Watford remain keen on the 29-year-old and have been encouraged to make a move by Gaitan, who is eager to leave Atleti this month.
The former Benfica ace has only started four games for Atletico this season and fears for his place in Argentina’s World Cup squad if he can not secure a move to a club who can offer him regular action.
Everton, Newcastle, West Ham and Southampton have also been linked with Gaitan, while a return to Portugal has previously been mooted.
Colchester will hand late fitness tests to Ryan Jackson and Brandon Comley prior to their clash with Yeovil.
Arsenal secured their place in the quarter-finals of the Europa League following their 3-1 defeat of AC Milan at the Emirates Stadium on Thursday.
Danny Welbeck scored twice against AC Milan to toast his England recall by sending Arsenal into the last eight of the Europa League.
Ipswich striker Joe Garner will not play again this season after it emerged he suffered a fractured skull against Sheffield United last week.