My Watchlist [102]: AAP... A Generational Setup?

Hi everyone. Today I’ll be covering an automotive aftermarket parts provider for the first time:

Advance Auto Parts Inc. (NYSE: AAP)

AAP’s chart is extremely interesting. It has been forming a series of higher highs and higher lows. Recently, it retested and successfully defended its 23-year old support trendline. The main pattern on AAP is that of a bullish megaphone pattern, with a series of higher highs but lower lows. It has a multitude of gaps to the upside, being one of the worst performers in 2022 and 2023. It is imperative for AAP to defend its bullish megaphone support trendline (in blue) and the 23-year support trendline for further upside.

On the weekly chart, there was confirmation of a move higher given by the bullish divergence that formed.

On the daily chart, AAP is trading in a near-term ascending channel that is forming a series of higher highs and higher lows. It is currently retesting its support trendline (in dark green). While there are no actionable divergences on the daily chart, AAP is coming back into a key prior resistance level at 69.38 which held from Aug’23 to Jan’24. If this level holds, it constitutes an S/R flip that would see a move back towards the bear market resistance trendline (in red). This should also cumulate in a retest of a prior strong support level at 99.13.

However, if AAP breaks down from the ascending channel, then it should target the prior strong support level at 63.83 to form what could be an extended right inverse shoulder of the daily inverse head and shoulders pattern. Otherwise, it should catch support at 60.40. This “zone” is a suitable area to add shares if we get to that level, otherwise accumulation even at current levels presents a decent reward.

Another additional thing I noticed was that AAP has left 0 gaps on the daily chart on its move up from 47. This is healthy price action, although we (ideally) want to see a bullish island gap form for bulls to take further control of the stock.

Based on a favourable technical pattern with downside towards 60-63 area and upside towards the 99 area, I am initiating coverage on AAP with a BUY sentiment.

Sentiment: BUY (New)

Summary (with Price Targets - NFA):

• Long-term bullish megaphone pattern and a short-term ascending channel pattern that is still bound by the red resistance trendline. Provided the current level holds, the measured move will be towards the 99.13 level.

• A breakdown from the ascending channel will see a retest of 63.83, and possibly 60.40.

All right, that’s all for this newsletter. Till next time!

$Advance Auto Parts(AAP)$ $Avis Budget(CAR)$ $CarMax(KMX)$ $Tesla Motors(TSLA)$ $Carvana Co.(CVNA)$

@TigerStars @TigerEvents @TigerWire @CaptainTiger @MillionaireTiger