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 added notations:
After peaking in November, AAP has fallen into a sideways trading range. While in the range, the stock has formed a key resistance level at $170 (red), and a $150 support (green). At some point the stock will have to break one of the two levels.
The Tale of the Tape: AAP is trading within a sideways range. The possible long positions on the stock would be either on a pullback to $150 or on a breakout above $170. The ideal short opportunity would be on a rally back up to $170, or on a break below $150.
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