Tickers in this Article: HMC, MGA, TM, DLPH
The major indexes continue to move higher with the S&P 500 SPDRS (NYSE:SPY) ETF recently making new 52-week highs. Over the last month, the Consumer Goods sector has been one of the top performing groups, and a handful of those large capitalization Consumer Goods stocks that are putting up big numbers are in the auto space. These stocks have been leading the market higher recently and remain in strong up trends. The question is, can it last?

Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

Delphi Automotive (NYSE:DLPH) has only been listed for a few months, but have performed very well. So far this year the auto parts company is up 43.35% to $31.88 from $22.24. The trend has been steadily higher, but has accelerated to the upside in 2012. Drawing a trendline from the start of 2012 shows the stock been moving higher in a fairly orderly fashion. Stops on long positions can be placed below the trendline that currently intersects at $30. A drop below indicates a further pullback although primary support is not too far away at $28.75. If $28.75 is penetrated, the stock could see a move down toward the longer-term trendline, currently near $25. At this time though the trend remains higher, and is crawling higher along the trendline. The next target to the upside is $35. (For related reading, see The Utility Of Trendlines.)

Magna International (NYSE:MGA), another auto parts company, is also posting big gains so far this year. The stock is up 39.42% to $47.43 from $34.02. After hovering near 52-week lows coming into 2012 the stock took off higher at the start of the year and hasn't looked back. The trend remains up and has been moving higher at a fairly steep angle. Using a trendline can limit the risk and warn of a potential correction. The trendline, which begins at the start of the year currently, crosses just below $45, which should provide some support. A drop below $45 indicates a move into the $42.50 region. The next logical upside target for the stock is the $50 level which is likely to pose resistance. A pullback, especially toward the $42.50 area, without going below $40.65 (50 and 200 moving averages are both in this area) presents an opportunity to pick up the stock with a relative small risk for the profit potential. (For related reading, see Speed Resistance Lines.)

Toyota Motors (NYSE:TM) is up 24.89% so far this year to $84.65 from $67.78. The trend remains up but it looks like the stock could be heading into some headwinds. There is a divergence on the RSI and $85 has been a strong resistance level in the last year. This is the first time the stock has tested the level in seven months, but from mid-March to July of 2011, the stock was unable to hold above $85. That does not mean it is time to just go short just yet though. If the stock can break and hold above $85 the next target is just below $90. Stop can then be placed below the recent low at $82.38. Primary support is at $78.16 - if that level is broken to the downside it does a lot of technical damage a further decline is likely.

Honda Motors (NYSE:HMC), which is up 23.93% to $38.84 from $31.34 could also be facing significant resistance as it approaches $40. Also showing divergence on the RSI, over the last year Honda has struggled in the $40 region. With the recent steep ascent, this could be the price area that results in a pullback. The trend is still up though, and a further advance can't be discounted just yet. The trendline that began in December currently intersects at $37, with a move below signaling a potential larger decline. The next support is at $35 and $33.50. Major support is at $32 The upside target is $40 with resistance extending up to $41.25. (For related reading, see Support & Resistance Basics.)

The Bottom Line
The market remains in rally mode, and these stocks in the auto industry are helping to push it higher. The trends remains up in all these stocks and traders should not fight the trend. Attempt to buy on pullbacks when pullback stops at a higher price than the recent swing low. Also, only take the trade if there is a worthwhile risk/reward.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Cory Mitchell did not own shares in any of the companies mentioned in this article.

Charts courtesy of stockcharts.com

comments powered by Disqus
Trading Center