Advance Auto Parts, Inc. (NYSE: AAP)

Advance Auto Parts, Inc. engages in the automotive replacement parts, accessories, batteries, and maintenance items for domestic and imported cars, vans, sport utility vehicles, and light and heavy duty trucks. It offers automotive parts, including alternators, batteries, belts and hoses, brakes and brake pads, chassis parts, etc; and accessories, such as air fresheners, automotive paints, anti-theft devices, emergency road kits, floor mats, ice scrapers, mirrors, etc. The company also provides chemicals comprising antifreeze, brake and power steering fluid, car washes and waxes, freon, fuel additives, and windshield washer fluid, as well as others.

Take a look at the 1-year chart of Advance (NYSE: AAP) below with my added notations:

1-year chart of Advance (NYSE: AAP)

Over the past month, AAP has hit the $158 resistance area (red) on 3 separate occasions. In addition, the stock has been climbing a trend line of support (green) since the beginning of June. Together, these two lines have formed an ascending triangle on AAP. Eventually, the stock will have to break either the $158 resistance or the triangle support.

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The Tale of the Tape: AAP is winding up between two key levels. A long trade could be made at the triangle support or on a break above $158. A break below the trendline would be an opportunity to enter a short trade.

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!

Good luck!

Christian Tharp, CMT

Follow me on Twitter: @cmtstockcoach