Home Depot Inc (NYSE:HD) shares rallied along with the broader stock market in the last two months of 2016. However, through a 12- to 14-month lens, HD stock largely remains rangebound. That said, the upcoming earnings season may provide a catalyst that can push Home Depot out of this big-picture consolidation phase.
But before we get into the trade, let me first wish all readers of my column a very happy, healthy and prosperous new year. I look forward to another great year of sharing market insights, high-probability trading ideas and conversing with readers.
And I very much hope you and I can make some serious money together in the coming year.
When considering any stock from a trading or active investing perspective, one of my primary due diligence components is to look at the stock in multiple time frames. That not only gives us perspective as to where the stock trades in multiple time frames and how those time frames may intersect with one another, but it also gives us great risk management lines to respect.
Before looking at the charts of Home Depot stock, let’s quickly note that the company’s earnings are slated for Feb. 21. This is very late in the regular quarterly earnings season, making Home Depot an attractive opportunity to focus on once the big slew of reporting companies have had their say.
Over the past few weeks, I read through a pile of research regarding housing and related stocks such as HD stock, and how they may react under the new Trump administration. Both the bulls and the bears make interesting cases. But especially early on in a new administration, I want to focus on what price action is telling us.
HD Stock Charts
Looking at Home Depot through a multiyear lens, what stands out first and foremost is the multiyear uptrending channel that the stock has largely been trading in (marked by the two purple dotted parallels).
The lower end of this range in 2016 also coincided with the blue 100-week simple moving average.
Also note that while from this multiyear angle HD stock is pushing higher, over the past 12 to 14 months, it has largely trotted sideways.
As a result of the year-end rally, Home Depot in December once again reached the upper end of its bigger-picture trading range and spent the last couple weeks of 2016 consolidating below resistance as marked by the blue band.
While HD remains immediate-term overbought through the lens of momentum oscillators, one could also make an argument that the most recent two-week consolidation phase is setting up another potential push to the upside in coming weeks or months.
Home Depot stock won’t see a breakout until and unless it can clear the $138-$140 area. But if and when such a breakout takes hold, a next upside target would be closer to the $145-$150 area.
Like what you see? Sign up for our daily Beat the Bell e-letter and get Serge’s investment advice delivered to your inbox every morning! Download Serge’s Free Special Report: 6 Keys for Successful Trading and Investing.