Penske Automotive Group, Inc. (NYSE: PAG)

Penske Automotive Group, Inc. operates as an automotive retailer. It sells new and used vehicles of approximately 40 vehicle brands; offers vehicle maintenance and repair services; and engages in the sale and placement of third-party finance and insurance products, third-party extended service contracts, and replacement and aftermarket automotive products. As of December 31, 2011, the company operated 320 retail automotive franchises, of which 166 franchises were located in the United States and 154 franchises are located outside of the United States primarily in the United Kingdom. It also has operations in Puerto Rico and Germany. Penske Automotive Group, Inc. was founded in 1990 and is headquartered in Bloomfield Hills, Michigan.

To review Penske’s stock, please take a look at the 1-year chart of PAG (Penske Automotive Group, Inc.) below with my added notations:

1-year chart of PAG (Penske Automotive Group, Inc.)

PAG has formed a clear resistance at $32 (red), which would also be a 52-week high breakout if the stock could manage to break above it. In addition, the stock has been climbing the $2 increments (blue) over the last (3) months. Starting from November you can see the bounce on $26, then $28 after that, and now $30. PAG appears to find each increment of $2 as important.

The Tale of the Tape: PAG is stepping higher on the 2’s towards its 52-week resistance at $32. A long trade could be made on a breakout above the $32 resistance or on a pullback down to the $30 level. A break below the $30 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