Shares of O'Reilly Automotive, Inc. (ORLY), the giant car parts retailer, have significant upside ahead of them. The stock has doubled in value over the past two years, and it appears that there's more room for it to run.

Recently, O'Reilly Automotive stock has traded in what's known as an ascending triangle pattern. This occurs when a stock is stuck basically trading sideways for an extended period of time. As the bulls and bears battle for the next major move in the stock, the pattern itself gives us a clear indication.

The pattern is depicted on a chart with a constant resistance level and a rising support trendline. Analysis shows that most ascending triangle patterns are continuation patterns. This means that the stock tends to follow the same path it was on before it got stuck in this pattern. 

In the case of O'Reilly Automotive, the stock was shooting higher before the recent consolidation. That tells us we can count on the breakout to be to the upside. With the stock currently sitting in the middle of the ascending triangle pattern, the chart calls for a 20% rally. Take a look:

Chart showing an ascending triangle formation on the chart of O'Reilly Automotive, Inc. (ORLY)
Optuma

We get a 20% rally by taking the height of the ascending triangle pattern and adding it to the red resistance level. This is the expected move once the stock breaks out.

The height of the pattern for O'Reilly Automotive is $60 per share. When you add that to the resistance level, you get a price target of $469, or 20% above its current price. However, traders should keep in mind that, if the stock breaks below the green support level, it's calling for a sharp double-digit drop. 

The Bottom Line

O'Reilly Automotive stock is in a great position to mount a 20% rally. The ascending triangle pattern gives us the two key levels to watch – a rising trendline and resistance. Once one of those levels is broken, you'll know to expect a quick double-digit move for the stock.