LKQ Earnings on July 28th, 2016

Tomorrow is a huge day for LKQ Corp. This has been a hot stock on our radar for several years. We even suggested buying back in late 2010 before it broke out. Since October of 2013 the stock has been range bound between $24 and $34 a share. Every time it reaches one end of the range it bounces around to the other end. An almost three year consolidation is very unusual but potentially very profitable. Below you will see the chart for LKQ over the last five years:

lkq-corp-stock-chart-historical

Notice the “train track” range between $24 and $34. Also notice the recent uptrend that started at the beginning of 2016. Now, let’s get to the earnings report that will come out before the open on Thursday, July 28th, 2016.

If the earnings are good, which we expect, LKQ will break through the top of this trading range in high volume. A break out of this range will allow this stock to rocket much higher. It will be on the radar of all the trading programs looking for breakouts, stocks at 52 week highs and stocks at all time highs. Institutional investors at mutual funds will gobble up the stock knowing it is out of the three year trading range. They also want to make certain they can publish the stocks owned in 2016 with those near 52 and yearly highs.

We will likely also see the uptrend line that started at the beginning of 2016 hold as the support level moving higher. Does this mean we could see this stock at $50 in 2016 or early 2017? It is very possible if the earnings are strong enough and the stock breaks out properly.

For decades William O’Neill has pointed out the importance of consolidation before a break out. If you believe in the IBD formula or the power of breakout stocks, you know the longer the consolidation, the higher the run after the break out.

We have two very strong cup and handle patterns in the LKQ chart. The large cup and handle spans almost three years and the smaller cup and handle is just over one year. Both of these formations are set up perfectly for a breakout after this earnings report.

All of that being said, LKQ needs to report a strong quarter. When looking at the Google Trends chart for LKQ over the last several years it is quite obvious more people are searching for keywords related to this company. What is interesting, is the fact that the searches continue to increase yet the stock has been in a trading range for almost three years now. We saw this with Ulta (ULTA) and, more recently, Dollar General (DG). Both of those stocks have rocketed to new highs recently and are some of the best stocks of 2016.

lkq-google-trends-chart

If more people are search, more people are buying and the management remains strong, we see no reason why LKQ should not have a record quarter to report on July 28th, 2016. Only time will tell.

Below you will find our research of the last five (5) years of LKQ search traffic from March 2011 until March 2016. Every month in 2016, search traffic has increased at least 10% year over year when compared to 2015.

LKQ
1/1/2011 41
2/1/2011 46
3/1/2011 46
4/1/2011 47
5/1/2011 46
6/1/2011 48
7/1/2011 50
8/1/2011 50
9/1/2011 47
10/1/2011 47
11/1/2011 46
12/1/2011 49
1/1/2012 49 1.195121951
2/1/2012 46 1
3/1/2012 53 1.152173913
4/1/2012 51 1.085106383
5/1/2012 54 1.173913043
6/1/2012 56 1.166666667
7/1/2012 59 1.18
8/1/2012 58 1.16
9/1/2012 57 1.212765957
10/1/2012 57 1.212765957
11/1/2012 54 1.173913043
12/1/2012 53 1.081632653
1/1/2013 56 1.142857143
2/1/2013 62 1.347826087
3/1/2013 63 1.188679245
4/1/2013 62 1.215686275
5/1/2013 58 1.074074074
6/1/2013 57 1.017857143
7/1/2013 61 1.033898305
8/1/2013 65 1.120689655
9/1/2013 59 1.035087719
10/1/2013 62 1.087719298
11/1/2013 59 1.092592593
12/1/2013 60 1.132075472
1/1/2014 63 1.125
2/1/2014 70 1.129032258
3/1/2014 73 1.158730159
4/1/2014 71 1.14516129
5/1/2014 69 1.189655172
6/1/2014 66 1.157894737
7/1/2014 72 1.180327869
8/1/2014 74 1.138461538
9/1/2014 68 1.152542373
10/1/2014 68 1.096774194
11/1/2014 66 1.118644068
12/1/2014 68 1.133333333
1/1/2015 71 1.126984127
2/1/2015 78 1.114285714
3/1/2015 82 1.123287671
4/1/2015 83 1.169014085
5/1/2015 81 1.173913043
6/1/2015 82 1.242424242
7/1/2015 89 1.236111111
8/1/2015 86 1.162162162
9/1/2015 87 1.279411765
10/1/2015 83 1.220588235
11/1/2015 80 1.212121212
12/1/2015 82 1.205882353
1/1/2016 87 1.225352113
2/1/2016 94 1.205128205
3/1/2016 100 1.219512195

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