AutoZone, Inc. (AZO) was favored by Jim Cramer in last Friday's Mad Money program. The company is set to report its latest quarterly numbers Friday so this is a good time to check the charts and indicators.
In this daily bar chart of AZO, below, we can see that prices have been in an uptrend from last April. Prices successfully retested its April low in May and then prices rallied from $600 to $925 recently.
AZO is trading above its rising 50-day moving average line and its bullish 200-day average line. The 220-day average was successfully tested in early July and the middle of October.
The daily volume pattern is hard to read and interpret but the daily On-Balance-Volume (OBV) line shows a bullish pattern from April with higher lows and higher highs.
The trend-following Moving Average Convergence Divergence (MACD) oscillator has spent most of the past 12 months above the zero line in bullish territory. This indicator is still above the zero line but the two moving averages that make up this tool have begun to narrow. A crossover and take profits sell signal could develop in the days and weeks ahead.
In this weekly bar chart of AZO, below, we can see that prices have made a significant rise from the middle of 2017 when the stock was in the $510-4480 area. AZO is above the rising 40-week moving average line. The weekly volume histogram right below the price chart shows that volume has been slowing or diminishing from the middle of 2017.
The weekly OBV line does something similar - it does rise from July 2017 to January 2018 but it then declines and has yet to best the 2018 high. This pattern suggests that buyers have been aggressive but just enough to keep the OBV line in an uptrend. The fact the OBV line has not confirmed the new price highs for several months is a potential "red flag".
The weekly MACD oscillator is in a bullish configuration above the zero line.
In this Point and Figure chart of AZO, below, we can see the recent upside breakout at $904.92 and a bullish price target of $1,154.24.
Bottom line strategy: AZO looks like it could be heading to be a "ten-bagger" (a ten-fold return) from its 2008 price low but the pattern of diminishing volume could be a problem. I say could be because it is not unusual to see volume shrink on really high-priced stocks like AZO. A weekly close below $870 would turn me bearish.