Advance Auto Parts’ technical analysis
So far in this series, we’ve covered Advance Auto Parts’ (AAP) 2Q17 revenues, margins, and valuation multiples. Currently, AAP’s forward price-to-earnings ratio is trending lower than O’Reilly Automotive’s (ORLY) ratio, but higher than AutoZone’s (AZO).
Valuation multiples can help investors (XLY) in making informed investment decisions, as technical support and resistance levels are crucial in timing the entry and exit from a stock.
Key technical levels
As of August 15, 2017, Advance Auto Parts stock was trading on a bearish note at $87.08. In May 2017, the stock fell below a key horizontal support level near $138. Since then, it has been unable to see any major recovery so far. This key technical level near $138 should act as a key horizontal resistance level in the coming months.
On the day of Advance Auto Parts’ 2Q17 earnings announcement, its stock witnessed a massive sell-off and was close to reaching a critical support at $86. Any early violation of this support level could trigger a fresh sell-off in the coming sessions and take the price lower towards the next support near $66.
In addition, the 14-day RSI (relative strength index), the key momentum indicator, is hovering at 24.1, which is within the oversold territory. This RSI level is confirming investors’ negative sentiments and indicating weak underlying momentum.