AAP closes above its opening price after recovering from early selling pressure
Advance Auto Parts Inc W/I (AAP) Technical Analysis Report for May 22, 2020 | by Techniquant Editorial Team
Moving lower for the 3rd day in a row, AAP ended the week 5.89% higher at 133.48 after losing $1.31 (-0.97%) today, notably underperforming the S&P 500 (0.24%) ahead of tomorrow's Memorial Day market holiday. Trading up to $1.91 lower after the open, the market managed to reverse during the session as bulls took control ending the day above its opening price. Closing within the previous day's range, prices failed to decisively move beyond the prior day's trading range in a lackluster session.
Daily Candlestick Chart (AAP as at May 22, 2020):
Friday's trading range has been $2.67 (2.0%), that's far below the last trading month's daily average range of $4.56. Things look different on the weekly timeframe, where the market's trading range of the last week has been slightly above the market's average weekly trading range. The longer-term, monthly volatility is currently slightly lower than usual for AAP.
During the whole day, prices traded within the previous day's range, unable to trade above the prior day's high or below the previous day's low forming an Inside Bar. Additionally, two candlestick patterns are matching today's price action, the Bullish Spinning Top which is known as bullish pattern and one bearish pattern, the Hanging Man.
After trading down to 131.38 earlier during the day, Advance Auto bounced off the key technical support level at 131.54 (S1). The failure to close below the support could increase that levels significance as support going forward. When prices bounced off a significant support level the last time on May 15th, AAP gained 4.01% on the following trading day.
Though still in a long-term downtrend, the short and medium-term trends both turned bullish already.
Selling might speed up should prices move below the nearby swing low at 130.07 where further sell stops could get triggered.
Among the six market conditions that our pattern recognition engine identified today, the statistics for the Support/Resistance based market condition "Bounced off Technical Support S1" stand out. Its common bullish interpretation has been confirmed for Advance Auto. Out of 378 times, AAP closed higher 59.52% of the time on the next trading day after the market condition occurred. The optimal exit for swing trading this condition on the long side has been after 10 trading days, showing a win rate of 58.73% with an average market move of 1.08%.