AutoNation, Inc. (AN) is multi-brand automobile dealership that provides both new and pre-owned vehicles and associated services. The stock has been below a "death cross" since April 24, 2018, and investors had the opportunity to reduce holdings when the stock tested its 200-day simple moving average (SMA) at $50.10 on June 19. The stock traded as low as $32.87 on Dec. 26, and that day ended as a "key reversal" when the stock closed the session above the Dec. 24 high.

The stock closed Wednesday, Feb. 20, at $39.11, up 9.6% so far in 2019 and up 19% from the low. Despite this strength, the stock is in bear market territory at 24.8% below its June 22 high of $51.99. AutoNation shares tested my value level for February at $37.63 on Feb. 7 and moved above my quarterly pivot at $38.36 on Feb. 15. This targets my risky level for this week at $41.42.

AutoNation reports earnings before the opening bell on Friday, Feb. 22, and analysts expect the auto dealer to post earnings per share of $1.15. The stock appears cheap with a P/E ratio of 8.77 according to Macrotrends. The company missed estimates in its last report released on Oct. 30, fueling the downside to the Christmas low. Wall Street projections show a year-over-year gain in earnings but with lower revenue. A negative wildcard for the auto dealer could be a rise in auto loan defaults.

The daily chart for AutoNation

Daily technical chart showing the share price performance of AutoNation, Inc. (AN)
MetaStock Xenith

The daily chart shows that AutoNation has been below a "death cross" since April 24, when the 50-day SMA declined below the 200-day SMA, indicating that lower prices would follow. This tracked the stock to its Dec. 26 low of $32.87. The shares closed that day at $34.36, above the Dec. 24 high of $33.67, confirming a "key reversal." AutoNation stock is now above its 50-day SMA at $36.54 but remains below its 200-day SMA at $42.41.

The stock closed at $35.70 on Dec. 31, which was the input to my proprietary analytics. This resulted in the horizontal lines at $38.36 and $35.53, which are my quarterly pivot and semiannual value level, the latter of which was tested on Jan. 2 as a buying opportunity. My annual risky level is above the chart at $64.62. The close of $38.75 on Jan. 31 resulted in my monthly value level at $37.63. My weekly risky level is at $41.42.

The weekly chart for AutoNation

Weekly technical chart showing the share price performance of AutoNation, Inc. (AN)
MetaStock Xenith

The weekly chart for AutoNation is positive, with the stock above its five-week modified moving average of $37.89. The stock is below its 200-week SMA, or "reversion to the mean," at $48.91, last tested during the week of June 22, when the average was $51.96. The 12 x 3 x 3 weekly slow stochastic reading is projected to rise to 66.72 this week, up from 58.63 on Feb. 15.  

Trading Strategy: Buy AutoNation shares on weakness to my monthly and annual value levels at $37.63 and $35.53, respectively, and reduce holdings on strength to my weekly risky level at $41.42 and to the 200-day SMA at $42.81. My quarterly pivot at $38.36 remains a magnet.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.