Auto parts stocks trail the S&P 500 of approximately 22% in 2020, as investors fret over the decline in consumer spending and supply chain disruptions caused by the pandemic. However, the group has found a higher gear yesterday, according to data cited by Barron’s found that light-vehicle sales have increased for six consecutive weeks. In addition, Credit Suisse has already expected May retail, auto sales down 52%, but now forecasts less severe decline of 16% and 26% year on year.
The better-than-expected outlook for the UNITED states sales of cars comes several days after the electric car maker Tesla, Inc. (TSLA) has taken over his Fremont, California, assembly plant in spite of conflicts with the local authorities. The movement, however, has received the support of President Donald Trump, with the president tweeting that California should allow Tesla to open the plant, adding that the state could do it quickly and safely.
Below, we take a more detailed look at three leading automotive parts companies and analyze their charts to identify potential trading opportunities.
Aptiv PLC (AP)
Headquartered in Dublin, Ireland, Aptiv PLC (AP) manufacturers and sells vehicle components, through two divisions: Signal and Power Solutions and state of the art Security and User Experience. The auto parts maker, which generates about 20% of the turnover of General Motors Company (GM), has accelerated its production of equipment for the autonomous driving and electric vehicles in recent years to stay on top of key trends sweeping the industry. On the earnings front, the company has surpassed bottom-line expectations in the past nine consecutive quarters. Aptiv stock has a market capitalization of $ 16.1 billion and dropped 33.27% on the year, beginning May 15, 2020.
Aptiv shares have recovered more than half of their coronavirus-driven sell-off since the low of just below $30 in mid-March. The stock has retraced approximately 20% over the past two weeks; however, yesterday’s intraday reversal back above the 50-day simple moving average (SMA) suggests that buyers may be ready to resume the upward trend. Tactical traders who take a position should set a stop below the May low of $57.26 and target a move to around $80, where the price finds the resistance of the horizontal trendline and the 200-day SMA.
LKQ Corporation (LKQ)
LKQ Corporation (LKQ) provides replacement vehicle parts, components and systems, and it operates an auto salvage business. The Chicago-based auto parts maker recently reported first quarter adjusted earnings of 57 cents per share on revenue of $3 billion, with both figures topping Wall Street expectations, amid a strong performance of the North American society. The analysts have a 12-month price target on the security to $32.56, representing 38% upside potential from Thursday, $23.54 close. Although LKQ shares fell 34.06% so far this year, they have rebounded by nearly 10% over the last month, commencing May 15, 2020.
Since reaching its April 30 high at $27.50, the stock has pulled back to the top trendline of an ascending triangle pattern that provides a buy the dip opportunity $22 support. In addition, the price has completed a two-day piercing pattern yesterday, which implies a potential reversal of the downward trend to an upward trend. Those who buy at current levels should set a take-profit order just below $30, where the price may encounter resistance from the month of October 2019 swing low and 200-day SMA. Reduce losses if the stock closes under the piercing pattern at the bottom $21.42.
BorgWarner Inc. (BWA)
BorgWarner Inc. (BWA) manufactures turbochargers and emission system parts through its Engine segment as well as auto electrical equipment, such as power electronics, control modules and components of the transmission, by the means of its Transmission business. The company earlier this month said that it has settled a dispute with the united kingdom smaller rival Delphi Technologies and plans to get it in the second half of the year 2020. The agreement contributes to the expansion of the auto marker’s clean technology portfolio. As of May 15, 2020, BorgWarner stock offers a 2.58% dividend yield, but decreased by 35.5% year to date.
The share price has broken down below the lower trendline of a rising wedge pattern on Wednesday, but it recovered strongly on Thursday, raising the possibility of a head fake trade. Active traders target a move to $34 – an area on the map which is the resistance of the 200-day SMA and a horizontal table of the price action over the last year. Consider exiting the position if the price closes below 50-day SMA.