Advanced Auto Parts (AAP) has roughly been cut in half since December. Prices gaped lower in very heavy volume the other day. This might be an exhaustion gap and it could be capitulation by longs who held and held all the way down.
What sort of strategy might be appropriate now? Let's look at the charts and indicators before deciding.
In this daily bar chart of AAP, below, we can see the slide this year from the $170 area down to near $80. Prices are below the declining 50-day moving average line and below the bearish 200-day moving average line. The big downside gap late in the decline suggests that this is the last gasp of selling. If that is the case then the gap should be filled relatively quickly. If the gap acts as resistance then prices are probably headed still lower. The daily On-Balance-Volume (OBV) line has been weak the past twelve months and suggests that sellers of AAP have been more aggressive for a long time. Momentum is not yet showing us a bullish divergence so we do not yet have a signal that the decline is slowing.
In this weekly bar chart of AAP, below, we only have bearish technical clues. Prices are below the declining 40-week moving average line. The weekly OBV line has bee weak for the past twelve months and the MACD oscillator is well below the zero line.
Bottom line -- the charts and indicators on AAP are bearish. Even if the recent price gap is an exhaustion gap, it will likely take a long period of repair before the long side of AAP becomes attractive again.