Don't Ignore This Chart!

Auto Parts Getting Its Engine Revving; Approaching MAJOR Breakout


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!


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Tom Bowley
About the author: co-founded Invested Central in 2004 and served as the site's Chief Market Strategist for more than 10 years. Invested Central provides stock market education and guidance for those interested in making their own financial decisions. During his tenure at Invested Central, Tom co-hosted Market Open LIVE, a national radio broadcast that covered many of the largest markets across the U.S. In addition, he has spoken at various conferences throughout the United States and Canada and has taught thousands of traders across the globe how to trade equities more wisely with an emphasis on managing risk and intermarket relationships. Learn More
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