The American retailer of aftermarket automotive parts and accessories, the largest in the United States, headquartered in Memphis, Tennessee, AutoZone, Inc. (NYSE: AZO) seems to be ready for a price surge according to its latest charts.
Bullish Indications
#1 Above Resistance Area: The stock’s daily chart shows that it has recently broken out of a resistance area. This is marked as an orange color dotted line on the daily chart. This is typically a bullish sign.
Daily Chart – AZO
#2 Price above MA: The stock is currently trading above its 50-day SMA. This shows that the bulls are currently in control.
#3 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), ADX and (+DI) are above (-DI), and ADX has moved up from below (-DI) and (+DI).
#4 MACD Above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered as a bullish bias.
#5 Bullish RSI: The RSI is currently above 50 and moving up, indicating possible bullishness.
#6 Fibonacci Support: Usually, after an up-move, stocks typically retrace to any of the key Fibonacci levels before surging back again. AZO had taken support at the 61.8% Fibonacci support level before moving higher, as seen in the weekly chart. So, this seems like a strong support area for the stock.
Weekly Chart – AZO
#7 %K above %D: The stochastics reveal that the %K line is currently above the %D line in the weekly chart of AZO. This is a possible bullish sign.
#8 Price above MAs: The stock is currently above the short-term moving average of 50-week SMA, as well as the longer-term moving average of 200-day SMA. This is a possible bullish sign.
#9 Bullish RSI: The weekly chart also shows that the RSI is moving higher after reaching oversold levels and is currently above 50. This indicates the possible bullishness of the current upmove.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, the ideal buy level for AZO is above the 200-day SMA, which is near the high of yesterday’s candle. This translates to a price of around $1128.50.
TP: Our target prices are $1170 and $1200 in the next 3-5 months.
SL: To limit risk, place a stop loss at $1102. Note that the stop loss is on a closing basis.
Our target potential upside is almost 4% to 6% in the next 3-6 months.
For a risk of $26.50, our target rewards are $41.50 and $71.50. This is a 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the resistance area. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.
Happy trading!
Tara
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