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Today, we’re opening a new bullish trade on The Home Depot, Inc. (HD). Traders responded fairly well to the ADP employment report, despite some soft areas in manufacturing, but services are still looking good. The bounce in several retail stocks has bled over into home improvement as HD rises late in the session. We see this level as support following July’s brief breakout and expect buyers to move in before earnings on Aug. 16.
We recommend a bullish position here as traders look for cash flow and value; however, we will want to watch the trade carefully as it gets closer to earnings. Right now there is enough flexibility to allow for a solid move higher, but if the market starts to stall you may need to plan for an earlier exit.
Buy to open the HD September 140 Calls (HD160916C00140000).
You can learn more about identifying price patterns and using them to project how far you think a stock is going to move in our Advanced Technical Analysis Program.