The stock of Advance Auto Parts, one the biggest auto parts retailers in the US, was down over 15% at one point yesterday after the company published its Q2 results. In our opinion, there was nothing that frightening in the report and the company reaffirmed its 2027 guidance. Advance is in the middle of a complex turnaround involving the optimization of its store footprint and improving the efficiency of its supply chain network.
Management guides for an adjusted operating margin higher than 4% in Q3, up from -0.3% in Q1 and already crossing the halfway mark towards the 2027 target of 7%. So it looks like things are rapidly improving at Advance Auto Parts. Is the post-earnings tumble a buying opportunity then? The Elliott Wave evidence below does support such a conclusion.
Similar Elliott Wave setups occur in the Forex, crypto and commodity markets, as well. Our Elliott Wave Video Course can teach you how to uncover them yourself!
The 4-hour chart above reveals that the recovery from just under $29 to almost $70 per share is a five-wave impulse. We’ve labeled the pattern 1-2-3-4-5, in what should be the first wave of a bigger uptrend. The five sub-waves of wave 3 are also visible. According to the Elliott Wave theory, a three-wave correction was supposed to follow, and it did.
Wave (2) has already entered the support area of wave 4, but it is still likely to evolve into a simple a-b-c zigzag. If this count is correct, it makes sense to expect the resumption of the uptrend in wave (3) as soon as the 5-3 wave cycle is complete. This combination of improving fundamentals and a bullish Elliott Wave setup is the reason why Advance Auto Parts stock found a place in our portfolio.
In our Elliott Wave PRO subscriptions we provide analyses of Bitcoin, Gold, Crude Oil, EURUSD, USDCAD, USDJPY and the S&P 500 every Sunday and Wednesday! Check them out now!
