AAP stuck within tight trading range
Advance Auto Parts Inc W/I (AAP) Technical Analysis Report for Jun 30, 2020 | by Techniquant Editorial Team
AAP ended the month 2.25% higher at 142.45 after edging lower $0.30 (-0.21%) today, notably underperforming the S&P 500 (1.54%). Trading up to $2.00 lower after the open, Advance Auto managed to reverse during the session as bulls took control ending the day above its opening price. Closing within the prior day's range, prices missed to decisively move beyond the previous day's trading range in a lackluster session.
Daily Candlestick Chart (AAP as at Jun 30, 2020):
Tuesday's trading range has been $2.93 (2.06%), that's far below the last trading month's daily average range of $5.02. Weekly volatility is also lower, being slightly below the market's average weekly trading range. The longer-term, monthly volatility is currently slightly lower than usual for AAP. Prices continued to consolidate within a tight trading range between 138.76 and 143.87 where it has been caught now for the last three trading days.
During the whole day, prices traded within the prior day's range, unable to trade above the previous day's high or below the prior day's low forming an Inside Bar. Additionally, two candlestick patterns are matching today's price action, the Southern Doji which is known as bullish pattern and one neutral pattern, the Doji. The last time a Southern Doji showed up on March 13th, AAP actually lost -16.22% on the following trading day.
Prices are trading close to the key technical resistance level at 144.63 (R1). The market was sold again around 143.36 after having seen highs at 143.66, 143.87 and 143.49 in the last three trading sessions. Obviously there is something going on at that level.
While the share is currently in a short-term downtrend, this might just be a correction, as both the medium and long-term trends are still bullish.
Buying could accelerate should prices move above the nearby swing high at 143.87 where further buy stops might get triggered. Selling could speed up should prices move below the close-by swing low at 138.76 where further sell stops might get activated.
Among the eight market conditions that our pattern recognition engine identified today, the statistics for the Support/Resistance based market condition "High close to previous three Highs" stand out. Its common bearish interpretation has been confirmed for Advance Auto. Out of 26 times, AAP closed lower 57.69% of the time on the next trading day after the market condition occurred. The optimal exit for swing trading this condition on the short side has been after five trading days, showing a win rate of 57.69% with an average market move of -0.25%.