Advance Auto Parts, Inc. provides automotive replacement parts, accessories, batteries, and maintenance items for domestic and imported cars, vans, sport utility vehicles, and light and heavy-duty trucks.
Take a look at the 1-year chart of Advance (NYSE: AAP) below with the added notations:
AAP has been trending lower for most of the past year. However, the stock is currently trading right where it was 2-3 months ago, and during that time you will see that the level of $100 (blue) has appeared repeatedly as either support or resistance. AAP is sitting just under that key level now.
The Tale of the Tape: AAP has a key level at $100. A trader could enter a long position on a break above that level with a stop placed under it. However, if traders are bearish on the stock, a short trade could be made instead on a rally up to $100.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT