Technical Analysis on Lithia Motors Inc. (LAD)

Trade Plan for Lithia Motors Inc. (LAD) for week of April 7th

Overview:

LAD is currently testing long-term support within a rising channel that spans over two years. While the support structure allows for long entries, we recommend initiating long positions only after a confirmed weekly settlement above the channel top at $307.62, which provides a buy signal on strength. The channel top is declining by approximately $6.82 per week.

Upside Trade Strategy

1. Buy Signal on Strength

• Entry: We recommend to only enter a long position on a weekly close above $307.62. This level is dropping $6.82 per week, so adjust accordingly each week.
• Stop Loss: Weekly close below $284.57 (just below recent structure and to limit risk on a false breakout).
• Target 1 (short-term): $357.93 (Fibonacci resistance level).
• Target 2 (long-term): $417.98 to $424.84 (March 2021 all-time high and rising channel top, respectively).
• Estimated Timeframe: 3 to 5 months for the move to the low $400s.

2. Bottom-Picking Alternative (Higher Risk)

• Entry: If you are an experienced trader – Buy near long-term support at $284.57, rising $1.06 per week.
• Stop Loss: Weekly close below $268.39, which is a significant secondary support defined by a rising 2/3 speed line.
• Target 1: $357.93 (Fibonacci level).
• Target 2: $417.98 to $424.84 (long-term highs).
• Risk Management: Use a maximum of 10% of total portfolio allocation on the position. Set your stop loss so that any potential loss is limited to 2% of total account value.

Downside Trade Strategy

1. Sell Signal on Weakness

• Short Entry: Only enter a short position after a weekly close below $268.39, which would confirm a break of both key supports.
• Stop Loss: $286.00 (just above recent support to reduce whipsaw risk).
• Target: $171.84 (long-term downside target based on structure).
• Estimated Timeframe: 3 to 5 months.
• Alternative Strategy: Consider purchasing put options with a $170–$180 strike price, expiring in 9–12 months, to express a bearish view with defined risk.

Options Trade (Optional for Long Strategy)

• Call Option (Aggressive): Buy long-dated calls (9–12 months out) with a $420–$430 strike if LAD is holding near $284.57 or following a confirmed weekly settlement above $307.62.
• Put Option (Bearish Setup): Buy long-dated puts (9–12 months out) with a $170 strike after a weekly close below $268.39.

Risk Management Guidelines

• Never allocate more than 10% of your portfolio to a single position.
• Ensure your stop loss level limits your total account loss to no more than 2%.
• Exit long positions if LAD closes below $284.57, and reverse short only after a confirmed close below $268.39.
• Avoid initiating trades in the middle of the $284.57–$307.62 range without a confirmed signal.

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