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LivestreamMenuGenuine Parts , an auto parts stock, has been fighting back after a rough start to the year, and it may just be getting started. Here’s why. GPC bottomed in May and has been rallying since that point, recently forming a very clear potential bullish cup-and-handle pattern. From a trading perspective, a breakout from this formation targets the 163-zone, which would bring GPC noticeably above its highest level from earlier this year. For short-term, technical-based trades, we always want to manage risk, so a logical stop would be just below the handle of this pattern. Beyond the bullish formation on the daily chart, though, there are other reasons we are bullish on the stock. Looking at relative performance first, GPC is an auto parts company, and there are a handful of other publicly traded stocks within the same industry. Compared with three of its biggest competitors—ORLY, AZO, and AAP—GPC has performed noticeably better over the last quarter and change. As the chart makes clear, GPC is not only breaking out of a bullish pattern but has also been in an uptrend since May. That is a very different picture from ORLY, AZO, and AAP, all three of which have been trending lower over the last few months. AAP also recently gapped lower following a disappointing earnings report. Thus, in terms of looking for a relative-strength leader within a very specific group, GPC fits that bill, as well. We can take the relative-strength analysis one step further by comparing GPC with XLY, the Consumer Discretionary ETF , of which GPC is a component. GPC has been in a clear long-term relative downtrend versus XLY, making lower highs and lower lows since topping on a relative basis in early 2023. However, the rally over the last few months has brought the ratio back near a very clear downtrend line. At the same time, GPC is getting close to completing a bullish formation on a relative basis, as well. Lastly, there is the very long-term picture. Looking back roughly 30 years, GPC has experienced four major drawdowns of approximately 50%: 1998 to 2000 2007 to the Great Financial Crisis low in 2009 2019 to the Covid low in 2020 Q4 2022 through this year’s low The most bullish aspect of this comparison is what happened after the previous major downturns. Following strong reversals from those lows, GPC went on to produce multi-year advances of approximately 180%, 375%, and 280%, respectively. As of now, GPC has rallied roughly 50% from this year’s low A full recovery to the prior all-time high from late 2022 would represent a move of roughly 110% from the low. Obviously, that would be substantial, but it would still pale in comparison with the magnitude of the advances that followed GPC’s previous major drawdowns. The bottom line is that GPC has done a good job of bottoming this year, forming a bullish pattern, outperforming its major peers, and approaching a potential breakout from a multi-year relative downtrend versus XLY. If those trends continue, the current recovery could have considerably more room to run. —Frank Cappelleri Founder: https://cappthesis.com DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.Read More
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