Don't Ignore This Chart

Auto Parts Getting Its Engine Revving; Approaching MAJOR Breakout

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I have to admit I love breakouts of long-term basing patterns and the Dow Jones U.S. Auto Parts Index ($DJUSAP) is currently in the midst of the mother of all basing patterns.  Dating back to 2014, we've seen a number of price resistance tests that all finished the same way - with failure.  I don't know if we get through this time, but if we do, you might want to consider an auto parts stock or two in your portfolio.  Here's a visual look at the long-term consolidation:

The lows have been creeping higher for the past several years, but the highs have been stymied in the 340-342 area.  There was one intraday move to 345 in July.  Otherwise, 342 has been a brick wall.  Look for a solid breakout on above average volume for confirmation to enter the space.

A few stocks that look technically solid, recently reported better than expected quarterly revenues and earnings, and should benefit by a breakout in the industry group would be Dana Corp (DAN), BorgWarner (BWA), Lear Corp (LEA) and WABCO Holdings (WBC).

Happy trading!

Tom

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Tom Bowley
About the author: co-founded Invested Central and served as the site's Chief Market Strategist for more than 10 years. His unique trading style combines both his fundamental and technical strategies to systematically manage risk while trading. A regular contributor to StockCharts.com's bi-weekly ChartWatchers newsletter since 2006, Tom's role at StockCharts has expanded significantly since he joined the company as a full-time Senior Technical Analyst in March of 2015. Learn More
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