Advance Auto Parts Retreats from ‘Buy’

On Friday, we looked at a Daily Price Chart and an On Balance Volume Chart for Walt Disney Co., noting that the stock has been in a price downtrend.

Today’s Chart of the Day is a 10-Month Simple Moving Average Chart for Advance Auto Parts Inc. (NYSE: AAP).

Advance Auto Parts, Inc. provides automotive replacement parts, accessories, batteries, and maintenance items for domestic and imported cars, vans, sport utility vehicles, and light and heavy-duty trucks. The company offers battery accessories; belts and hoses; brakes and brake pads; chassis and climate control parts; clutches and drive shafts; engines and engine parts and more.

Now, below is a 10-Month Simple Moving Average Chart for Advance Auto Parts Inc.

Back in January 2020, the AAP 1-Month Price crossed above the 10-Month simple moving-average (SMA) indicating AAP is on a PowerTrend ‘sell’ signal (circled).

BZUN heading down in lower lows

Guess what happened next…

Sure enough, prices continued to fall.

Since the PowerTrend ‘Sell’ signal occurred for the stock back in January, when the stock was around $131.75, the stock has gone on to drop 13.7%.

Now, as you can see, the 1-Month moving-average is still below the 10-Month SMA. That means the bearish trend is still in play!

This bearish price trend makes AAP a good candidate for a put option purchase.

As long as the 1-Month Price remains below the 10-Month SMA, the stock is more likely to keep trading at new lows in the coming days and weeks.

We’ll be keeping our eye on this stock as it continues to trend downward so we’ll know the moment the market conditions shift and the stock begins to come back up offering a better buying opportunity in a bearish market.

Chuck’s Market Take:

The 11 year Bull is offically dead.

The major market indexes are now in confirmed Bear markets across the board defined by a 20% decline from peak prices.

The Fed is doing everything in its power to stop the bleeding, and so far, it’s not working.

This is unlike anything I’ve ever seen in my 36 years of trading. It’s widespread and while some sectors are not getting slammed as hard, nothing is a “safety” group here.

We’ll see some bounces – sooner rather than later – but getting in too early is extremely dangerous and can compound losses to the point of no return. Look at what happened this past Friday. A huge rally into the close was offset at the open Monday, even after the Fed cut rates a full point and injected more money into the system.

Remember, our job as traders is to keep drawdown to a minimum. This is why we use options. We clearly define risk on every single trade before we place any orders.

There WILL be opportunities here to make money. The PowerTrend system is a trend following system, and works very well in a Bear market.

It’s time to be patient and trust the signals. Rest assured, I’ve got your back here. I’ll be monitoring the markets and looking for the best trades when they setup.

Stay Safe,

Chuck Hughes
Editor, Chart Of The Day

Chuck Hughes

Written By Chuck Hughes

Before Chuck Hughes won 10 Trading Championships, he was an accomplished Air Force pilot. In fact, he credits his success as a stock and options trader to his disciplined upbringing and career. When he was deciding between a career in the Navy and a career in the Air Force, the Navy told him he’d only have a 33% chance of flying jets. The Air Force gave him 100%. He liked those odds better. 35 years ago, Chuck had a wife, a young daughter, a son on the way, and a huge mortgage to afford. He didn’t want to give up on his lifelong dream and stop flying for a major commercial airline. He knew he needed to supplement his income during the 15 days a month he wasn’t flying. So he used his experience in discipline and math, and his understanding of finance and the stock markets (which he’d always been interested in,) and opened a $4,600 trading account. He made over $460,000 in profits his first two years of trading, and he hasn’t looked back since. When he was diagnosed with Meniere’s disease 15 years later, which commonly leads to vertigo…He knew his career as a pilot wouldn’t last much longer with those odds. But he didn’t have to scurry to find another gig, or panic about how his family would eat… He’d spent the last 15 years perfecting his system and raking in cash. As an options trader, Chuck does not let his emotions get in the way of his trading strategy. He adheres to disciplined and methodical options and stock trades. Because he respects the options game so highly, and understands the true freedom that financial solvency can bring, Chuck was able to design and refine his system and win those 10 Trading Championships. Put simply, Chuck Hughes’ trading strategies work, and in all types of market conditions. They’ve worked throughout the bull, bear, and flat markets America has seen in the last 30 years. Chuck Hughes has spent that time building a reputation as one of the most trustworthy options traders in the industry. His publishing group Legacy Publishing LLC was one of the few trading groups on the planet to have correctly predicted and profited from the 2008 financial crash .As a published author 16 times over, a 10-time Trading Championship winner, and an options-trading teacher for 25 years, he’s learned to trade and teach without an ego.