BLUF: 20% swing for 2 months at a 5% risk with the potential for a trend breakout.
Whether or not you "believe" in a recession in 2023, the idea of one on the horizon should alter how we pick stocks. Jim Cramer has been pushing bargain retailers for months and TJX is up over 40% since May of 2022. Taking the idea of a recession and the movement of money into the bargain or overstock companies can lead us to the auto industry. Benzinga posted on 30 Dec, 22 how much the major car companies have been down. With the decrease in consumer spending on vehicles, the idea here is that the money will shift from new cars to repairing current vehicles through auto parts stores. The three big companies focused on keeping used cars running are Autozone (AZO), Advance Auto Parts(AAP), and OReilly Automotive (ORLY).
AZO and ORLY have been performing nicely for multiple years, while AAP is at its Jan 21 low. The company president and CEO stated in the Q3 earnings report that "we're not at all satisfied with this outcome (lagging top-line growth)" and "as we develop plans for 2023 and beyond, we've done a deep dive on the competitive environment and the actions necessary to accelerate growth". This could be the inflection point and turn the company around from a leadership and financial perspective.
Turning to the chart. The stock has been following a negative trend since January 2022. The stock has tested and bounced off the $143 low from January 2021. Since this decline began, it has tested the lower trendline and rebounded sharply to the upper trendline lasting, 56, 60, and 36 days.
I believe the stock has the chance to continue trending toward the upper trend line over the next two months. If it can break the upper trend and we see continued signs of a recession, it could break out of the negative channel AAP is currently in.
The downside is about 5.5% to the recent lows with a 20% upside to the upper trendline.
The stock also has a 4% dividend.
Whether or not you "believe" in a recession in 2023, the idea of one on the horizon should alter how we pick stocks. Jim Cramer has been pushing bargain retailers for months and TJX is up over 40% since May of 2022. Taking the idea of a recession and the movement of money into the bargain or overstock companies can lead us to the auto industry. Benzinga posted on 30 Dec, 22 how much the major car companies have been down. With the decrease in consumer spending on vehicles, the idea here is that the money will shift from new cars to repairing current vehicles through auto parts stores. The three big companies focused on keeping used cars running are Autozone (AZO), Advance Auto Parts(AAP), and OReilly Automotive (ORLY).
AZO and ORLY have been performing nicely for multiple years, while AAP is at its Jan 21 low. The company president and CEO stated in the Q3 earnings report that "we're not at all satisfied with this outcome (lagging top-line growth)" and "as we develop plans for 2023 and beyond, we've done a deep dive on the competitive environment and the actions necessary to accelerate growth". This could be the inflection point and turn the company around from a leadership and financial perspective.
Turning to the chart. The stock has been following a negative trend since January 2022. The stock has tested and bounced off the $143 low from January 2021. Since this decline began, it has tested the lower trendline and rebounded sharply to the upper trendline lasting, 56, 60, and 36 days.
I believe the stock has the chance to continue trending toward the upper trend line over the next two months. If it can break the upper trend and we see continued signs of a recession, it could break out of the negative channel AAP is currently in.
The downside is about 5.5% to the recent lows with a 20% upside to the upper trendline.
The stock also has a 4% dividend.