This week we'll focus on the auto parts industry, as they're the latest to report earnings. Last year, the auto parts stores were a stellar outperforming area of the market and many traders have also noted the relative strength during the end-of-year sell off that seemed to take down every stock in the markets.
The auto parts stores consist of only a few names and all of them enjoyed double digit gains last year. O'Reilly Automotive
Most of the gains happened rapidly in the beginning part of last year. Once the summer hit, the stock sat in a tight trading range near highs. Nearly every corner of the market sold off at the end of the year, but ORLY managed to stay near highs in a range.
This week, the stock broke out of that range following an impressive earnings beat. This woke the bulls, who have been waiting for just such a technical reason to buy the stock.
Short-term traders should look to play this breakout momentum to the $380 - $400 area. For investors, this may not be the time to dive all-in, but it does represent a point of starting a position. If the relative strength continues, then one could argue that pullbacks are reasons to add to a longer-term position.