AutoZone, Inc. (AZO) is a retailer of after-market auto parts and accessories. These products are usually cheaper than the automakers' branded parts and are made for do-it-yourself vehicle owners.
The stock opened Monday at $687.37, down 13% year to date but solidly in bull market territory at 40% above its post-election low of $491.13 set on July 20. AutoZone stock set its post-election high of $813.70 on Dec. 8, 2016, and the stock is currently in correction territory at 15.5% below this level. The all-time intraday high of $819.54 was set during the week of July 15, 2016.
Analysts expect AutoZone to post earnings per share of approximately $9.80 when it reports results before the opening bell on Dec. 5. Despite recent share price strength, some say that the company is struggling to protect profits and increase revenue growth, as the year-over-year growth rate has been disappointing. (See also: AutoZone Q4 Earnings and Revenues Top Estimates, Up Y/Y.)
The daily chart for AutoZone
The daily chart for AutoZone shows that the stock is poised to confirm a "golden cross" in the case of a positive reaction to earnings. A "golden cross" occurs when the 50-day simple moving average (SMA) rises above the 200-day SMA, indicating that higher prices lie ahead. Today, the 50-day SMA is $609.37, closing in on the 200-day SMA of $615.72.
The weekly chart for AutoZone
The weekly chart for AutoZone is positive but overbought, with the stock above its five-week modified moving average of $635.17 and having crossed above its 200-week SMA at $664.64 last week. This puts the stock above its "reversion to the mean" for the first time since the week of May 25, when the average was $647.18. The 12 x 3 x 3 weekly slow stochastic reading is projected to end this week at 90.47, up from 89.65 on Dec. 1. This momentum reading is well the overbought threshold of 80.00 and now represents what I describe as an "inflating parabolic bubble" with a reading projected to be above 90.00.
Given these charts and analysis, my trading strategy is to buy weakness to my monthly value level of $498.05 and to reduce holdings on strength to my annual risky level of $866.89. My quarterly pivot (or magnet) is $692.68. (For more, see: AutoZone Chosen by Region 4 Center as Parts Provider.)