Advance Auto Parts, Inc. (AAP) is due to report its latest quarterly earnings so let's see what the charts are suggesting ahead of the numbers and guidance.
In this daily bar chart of AAP, below, we can see that AAP suffered a big decline into a November low. Prices stabilized and eventually broke out above $108. AAP closed above the 50-day moving average line in November and its slope turned bullish (positive) in December. Prices are now back below the 50-day line and it's the line is cresting or rolling over.
AAP broke above the declining 200-day line in early January but it is now back below it. It looks like the longer-term trends are reasserting themselves. The daily On-Balance-Volume (OBV) showed some improvement in November and through to late January but it has weakened in the past four weeks or so. The trend-following Moving Average Convergence Divergence (MACD) oscillator gave a take profits sell signal in late January and is currently below the zero line for an outright sell signal.
In this weekly bar chart of AAP, below, we can see the long decline in AAP from around $200 in 2015 to $80 last year. AAP rallied to close above the declining 40-week moving average line. Prices held above the 40-week line for a few weeks but they are back down for a test of the line and maybe a break below it in the weeks ahead.
The weekly volume pattern does not show a pattern of increasing volume the past three months and that is not encouraging as chartists like to see volume increase in the direction of the trend. The weekly OBV line did improve in November and December but it has weakened from the middle of January suggesting that sellers have become more aggressive again.
The MACD oscillator gave a cover shorts buy signal in early November but it hasn't quite gotten above the zero line and now appears to be turning lower again.
In this Point and Figure chart of AAP, below, we can see a bearish price target of $91.30. A trade at $102.38 will be a new low for the move down and could open the way for further price weakness. Strength above $116.52 is probably needed to open the way for further gains.
Bottom line: AAP was looking strong at the beginning of the year but prices peaked in late January and have given back much of those gains. The risk now is for further weakness. A break of $100 could mean a decline to $90 in the weeks and months ahead.