Auto parts and accessories retailer Advance Auto Parts Inc. (NYSE: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, 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 17 the stock gapped-down big, causing it to remain in a trading range until the end of October. On November 1 the stock staged a huge rally, breaking past a key medium-term resistance line (blue) and closing the entire down-gap from May 17.
Ever since the big rally from November 1, 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 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 time is the 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.