Here’s my take on the auto parts sector. Check out GM, F, BWA, TEN, LEA and DAN. (December 07, 2016)
GM BWA TEN LEA DAN
I want to look at auto parts in this video today. Typically I don’t do 6 charts in 1 of these Free Chart videos, but it just kind of seems right here, so that is what I am doing. I am actually wanting to look at the auto PARTS sector, but I am starting with the autos, because that is where the parts go. Ford ( NYSE:F ), a really, really nice breakout here. Now the thing is, the market recently learned that Ford ( NYSE:F ) and GM ( NYSE:GM ) are doing a little bit better than expected. We have seen this kind of gradual downtrend, right? But then if we look at the weekly chart you can see it kind of looks like a double bottom, maybe even a triple bottom. Everything bottomed here, remember that was a fun, late August day.
We have Ford ( NYSE:F ) that is starting to break out of a multi, multi, multi month downtrend. We have GM ( NYSE:GM ), that has been forming a base for a while, and it is starting to move higher. You can really see this breakout here in early November. Ford ( NYSE:F ) is kind of a similar deal, they all kind of happened at the same time in early November. So it make sense that the auto parts companies, and I am not talking about Auto Zone ( NYSE:AZO ), although that is doing okay too. But I am talking about the companies that actually make the parts for the automobiles, trucks, things like that. We are going to look at some of these here.
BorgWarner ( NYSE:BWA ); huge move, big move. Again, it is a double bottom here. If I zoom out and look at the weekly chart I see a really nice double bottom. Lets assume this is support right around here over the last two lows, and then we come up here. We have got about $12.31, that’s about 45 percent from the bottom, right? Actually, that is here, that is where we are, $12.00. So then I take this and extend it up $12.00. And what do we get? We get $52.00. I make it a little more conservative because that is just how I roll. I will say, from a technical standpoint, I would look for another $10.00. Basically another $10.00 up to about $50.00 on my expectations for where this move can go. Now, not over night, you can see the move that this has had, huge volume.
This is a classic phase one breakout from a volatility squeeze. Phase one is the initial move. Phase two, how much is it going to pullback? Phase three, if there is one, a breakout to new highs and we are off to the races. The thing about BorgWarner ( NYSE:BWA ) is, from a fundamental standpoint, you have to look at this, if you are looking beyond swing trading, they have got steady growth, less than 10 percent so it is not great, but the fundamentals are compelling if you want to invest here.
Now, Tenneco ( NYSE:TEN ), we will look at the weekly chart. It is only like a few dollars from it’s all-time high. You can look at this in a number of different ways. Lower highs, lower lows. I can start drawing curves here, ultimately find a continuation head and shoulder pattern. And then looking for more upside, I would prefer just to do this: We have seen a lot of this types of thing lately, a really short and deep head and shoulder pattern with a breakout here. This company has pretty steady earnings growth as well as revenue growth. So we like to get the leaders here, from a fundamental standpoint. If all the stocks are working, and they are, I want to get the ones with the best fundamentals, because the others are just kind of a ‘me too’ group of stocks. I am not talking about the stocks themselves, I am talking about the people that are trading them. So Tenneco ( NYSE:TEN ) works.
Now, Lear Corporation ( NYSE:LEA ). They have really steady and consistent per share growth, actually the fastest growth in the group. Not the fastest rally, though this is doing okay as well. But you can see on a longer-term chart, this is just coming out of a prolonged sideways trend. So this has a lot of room to go. By the way, you can look at these earnings dates and you can see there are no earnings for a while.
And finally, near and dear to my heart, DAN, otherwise known as Dana ( NYSE:DAN ). This has the worst fundamentals of the group (I can’t really take that personally), but the stock is moving. And so literally, any of these stocks work, as long as you have this reality, and that is, you have missed a big move. I don’t know how much this is, like 20 percent here from a breakout, so you have missed this part of the move. You can’t get that back. You can’t go pile in and buy twice as much expecting half as much of a move going forward. You just have to say, “Okay, well I missed this part of the move, but I still want to participate.” And so you do that and then you use a trailing stop.
Lets just look at this just for giggles here, 10-day moving average is fine. You can just use that, if you want, as a trailing stop it is kind of a down and dirty way. Or you can use the prior day’s intraday low. Like tomorrow your trailing stop would be just a little bit below today’s low of 18.68. Or for that matter you could go two days back. That works when a stock is trending really well. It does not work when a stock is chopping around. You might as well just sell the stock because you are going to get stopped out. So when a stock is trending really strongly, that is when you can use this prior day’s or two day’s ago intraday low as a trailing stop. But use one and then you can get involved in these stocks and you don’t have to worry about them whipping down and taking all of your dough.
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