Trade of the Day: Home Depot (HD)

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U.S. indices surged more than 1.5% yesterday as fears of a possible Fed rate hike subsided. Given the disappointing jobs report on Friday that revealed only 142,000 jobs were added last month, many investors grew more confident that the Federal Reserve would continue to postpone any key interest rate hike. Some reports are predicting that the rate hike might even be punted to early 2016.

Now, while the five-day rally has been a very welcome reprieve following a rough couple of weeks, we’re not out of the woods yet. There are still more reasons why this market could still go lower. As such, the best strategy is to slowly start testing the waters with fundamentally strong and up-trending stocks — or, as I like to say, “volatility-proof” stocks.

There have been a number of stocks that have been able to bounce back from August’s dip and have remained on a bullish trend. One such company is today’s trade recommendation, a household home improvement company that has remained steady.

Home Depot Inc (HD) is one of the largest home improvement retailers in the United States. HD has a 52-week range of $86.35–$123.80, a market cap of 153 billion, and a dividend yield of 2%.

The stock has also been on a bullish trend since May 2015 and reported strong second-quarter earnings results. HD reported an adjusted EPS of $1.71, in line with analysts’ estimates, so it wasn’t surprising that company management even raised its fiscal 2014 EPS guidance to $5.31–$5.36 per share, while analysts expect $5.27.

Home Depot also scores very well in the Turner Analytics database. Its fundamental score of 65 out of 100 is good, as is its technical score of 70 out of 100. The stock is also significantly outperforming both its Sector (Consumer Discretionary) and its Industry (Home Improvement Stores). HD has an expected move of 4%, or $4.66, which means its current volatility rating is low.

Now, there are always risks with every trade. If the current market trend extends lower and if the U.S. begins to show signs of slipping into a recession, this stock could get hurt significantly. But Home Depot has bucked the market trend nicely for well over a year, and it looks like we’ll get an opportunity to take advantage of that strength this week.

So, I recommend entering HD as soon as possible at $118 or better, and set your stop at $112.55.

Mike Turner and his team of software engineers developed Turner Analytics, a sophisticated software market and trade-timing system that provides unbiased, quantifiable recommendations on thousands of equities and rates, ranks and scores these equities from best to worst in an easy-to-use on-line tool for individual investors. He is also the editor of Signal Investor.

Most recently, Mike launched Quick Hit Trader. This trading service is based on weekly analysis of the 6,000+ stocks and ETFs in his proprietary Turner Analytics computer stock-rating system. Every Monday before the market open, Mike emails subscribers his three best trades for the week, including the buy, sell and target price.


Article printed from InvestorPlace Media, https://investorplace.com/2015/10/trade-of-the-day-home-depot-hd/.

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