Advance Auto Parts Ready To Break Out

Auto parts and accessories retailer Advance Auto Parts Inc (AAP) is rallying along with the broader market thus far this year, higher by close to 11%.  Unlike the S&P 5oo which is looking increasingly extended in the intermediate term, the chart of this auto parts retailer suggest the stock is ready to rally further.

Looking at a twelve month chart of Advance Auto Parts Inc (AAP), the stock’s big stumble in May 2012 still shows its scars.  After starting to come off its all-time highs in April 2012, on May 17th the stock gapped-down big, causing it to remain in a trading range until the end of October.  On November 1st the stock staged a huge rally, breaking past a key medium-term resistance line (blue) and closing the entire down-gap from May 17th.

Ever since the big rally from November 1st, the stock has continued to shape a series of higher lows (blue ovals) and finding resistance for the third time near the $81.50 mark.  It is not coincidental that $81.50 also happens to be the key 61.80% Fibonacci retracement of the move from the April 2012 top down to the June 2012 bottom.

The closer-up daily chart of Advance Auto Parts Inc (AAP) shows that the stock’s March rally is now bringing it in to the $81.50 are for the third time in about four months.  As I often point out, the more a level gets tested, the more it weakens as resistance.  Maybe the  third is is a charm for the stock to finally break through resistance.  Both the rising 50 and 100 day simple moving averages are acting as good support for the stock, and any daily close above $81.50 should usher in momentum players to squeeze the stock higher.




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