AutoZone, Inc. (AZO) is a retailer of aftermarket auto components and accessories that are usually cheaper than the branded parts available at automobile dealerships. The company extended its taking streak of beating earnings per share (EPS) estimates to 10 consecutive quarters. The stock popped to an all-time intraday exhilarated of $1,274.40 when it reported on Dec. 10. This was above its monthly risky level at $1,249.51 as an opportunity to reduce holdings.
AutoZone staple closed Thursday, Dec. 26, at $1,210.72, up 44.4% year to date and in bull market territory at 51.4% above its Jan. 8, 2019, low of $738.41. It is currently merchandising 5% below its all-time intraday high of $1,274.40 set on Dec. 10. The company has been in expansion mode, building new depend ons as more older vehicles require repairs. With expansion comes increased costs of technology and payroll.
The continually chart for AutoZone
The daily chart for AutoZone shows that the stock began 2019 in excess of a “golden cross,” which was confirmed on July 19, 2018. This bullish signal occurred when the 50-day SMA acclivity above the 200-day SMA, indicating that higher prices lie ahead. The stock is now above its 50-day and 200-day SMAs at $1,173.16 and $1,102.40, individually.
The close of $838.34 on Dec. 31 was an important input into my proprietary analytics, and the stock’s annual pivot is $993.23, which was a magnet and buy aim between March 21 and May 21, when the stock reacted positively to strong earnings. Its second half value uniform is $958.78. Its fourth quarter pivot at $1,168.86 was a magnet between Nov. 7 and Dec. 9, the date before the latest earnings pop. The stockpile failed to hold its December risky level at $1,249.51 on Dec. 12.
The weekly chart for AutoZone
The weekly blueprint for AutoZone is positive but overbought, with the stock above its five-week modified moving average of $1,186.06. The stock is swell above its 200-week SMA, or “reversion to the mean,” at $801.69. This was last crossed during the week of July 27, 2018, when the standard in the main was $684.94.
The 12 x 3 x 3 weekly slow stochastic reading is projected to slip to 82.33 this week, down from 84.85 on Dec. 20. At the July 16 stiff, this reading was 90.69, above the 90.00 threshold as an “inflating parabolic bubble,” and from the July 16 momentous of $1,186.60 to the Aug. 13 low of $1,032.60, the stock slumped by 12.9% as this bubble popped.
Trading strategy: Buy AutoZone dispensations on weakness to the quarterly value level at $1,168.86 and to the 200-day SMA at $1,102.39. Reduce holdings on strength to this month’s dicey level at $1,249.51.
How to use my value levels and risky levels: Value levels and risky levels are based upon the last nine monthly, quarterly, semiannual, and annual privates. The first set of levels was based upon the closes on Dec. 31, 2018. The original annual level remains in play. The close at the end of June 2019 instituted new semiannual levels, and the semiannual level for the second half of 2019 remains in play. The quarterly level changes after the end of each phase of the moon, so the close on Sep. 30 established the level for the fourth quarter. The close on Nov. 29 established the monthly level for December.
My theory is that nine years of volatility between closes are passably to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility, investors should buy rations on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky uniform that was violated within its time horizon. Pivots act as magnets that have a high probability of being checked again before their time horizon expires.
How to use 12 x 3 x 3 weekly slow stochastic readings: My choice of using 12 x 3 x 3 weekly almost imperceptible stochastic readings was based upon backtesting many methods of reading share-price momentum with the objective of decree the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I cause been happy with the results for more than 30 years.
The stochastic reading covers the last 12 weeks of turned ons, lows, and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low versus the closes. These evens are modified to a fast reading and a slow reading, and I found that the slow reading worked the best.
The stochastic pore over scales between 00.00 and 100.00, with readings above 80.00 considered overbought and readings below 20.00 considered oversold. Recently, I famed that stocks tend to peak and decline 10% to 20% and more shortly after a reading rises beyond 90.00, so I call that an “inflating parabolic bubble,” as a bubble always pops. I also refer to a reading here 10.00 as “too cheap to ignore.”
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.