Trade of the Day: O’Reilly Automotive Inc Could Be a Growth Gem

Shares of auto parts companies had a tough time in the first half of 2017 but bounced back in the second half. Not all auto parts companies are created equal, however, which is why today I am highlighting shares of O’Reilly Automotive Inc (NASDAQ:ORLY).

ORLY Stock: O'Reilly Automotive Inc Could Be a Growth Gem

Although in this column I mostly discuss actionable trading and investing ideas in well-known large-cap companies, sometimes it pays to turn over a few more rocks to potentially discover a large-cap name with a little less sex appeal to the masses — for that’s where some explosive rallies can occur.

So you know, O’Reilly Automotive is scheduled to report its next batch of earnings on Feb. 7, which is to say that any “swing trading” positions are best to be reduced or gotten out through the earnings report and reevaluated after the report. This is just sound risk management I have learned over the past 20 years as a trader and investor.

The story for automotive parts companies in the first half of 2017 in particular was that, Inc.(NASDAQ:AMZN) would cannibalize their business models once it gets into the auto parts business.

While this seemed like a rational line of thought, ORLY stock has since rallied back 55%.

ORLY Stock Charts


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Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week

On the multi-year weekly chart we see that the sharp rally off the July 2017 lows has since pushed ORLY stock back to a diagonal line of resistance but has also as a result managed to push  back above its 200-, 100- and 50-day simple moving averages.

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Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day

On the daily chart, we also see this diagonal line of resistance that ORLY stock is now pushing up against. Over the past three weeks, the stock’s 50-day moving average has pushed back above the 200-day — and at present the 100-day is also getting close to crossing back above the 200-day.

From a momentum perspective, the RSI trend indicator at the bottom of the chart continues to slope higher.

As more investors wake up to the possible fact that O’Reilly Automotive is not going out of  business anytime soon and could even seen both margin and top line growth, ORLY stock could gain further upside momentum and climb toward $300 and ultimately even toward $350.

Check out Anthony Mirhaydari’s Daily Market Outlook for Jan. 19.

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