Home Depot Inc (HD) — There are numerous factors working in favor of America’s largest home improvement retailer, which operates a chain of more than 2,200 stores. These include the continuing recovery in the housing market and low interest rates.
HD stock fell 2% on Nov. 18, following the company’s Q3 earnings report. While adjusted EPS rose 21% year over year to $1.15, it missed the consensus estimate by a penny. But shares quickly recovered, hitting a new all-time high last week as the broader market suffered.
Credit Suisse (CS) reported that while overall retail traffic was down over 5% year to date, Home Depot saw year-over-year traffic growth of 3.2% for the quarter. And it was up 7.4% from two years ago.
Analysts at S&P Capital IQ said the home improvement retailer should benefit from a focus on customer service as the housing market gradually recovers. They also expect 21% growth in the dividend rate next year and additional share repurchases after the completion of the current $7 billion program, which is scheduled to end in fiscal Q4.
I like stocks that go up, especially ones like HD stock that advance in the face of an overall market adjustment.
Shares broke to a bull channel in mid-August. Immediate support is at the 20-day moving average and lower line of a jagged support channel. Major support is at the 50-day moving average at $96.25.
Given the current market conditions, traders may want to wait for a test of that line. However, upside volatility may also have an impact on HD stock, as it did in August and October. So taking a half position now and half in the event of either a pullback or a breakout may be prudent.
The trading target for HD stock is $115 with a suggested stop-loss of $92.
