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) with the added notations:
AAP has formed an important level of support at $150 (red) over the past 7 months. Now that the stock has hit that level again, traders might be able to expect some sort of a bounce. However, if the $150 support were to break, lower prices should follow for AAP.
The Tale of the Tape: AAP has key support at $150. A trader could enter a long position at or around $150 with a stop placed under the level. If the stock were to break below the support, a short position could be entered instead.
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