This morning’s headlines are focusing on Home Depot Inc (NYSE:HD) as the stock’s earnings are providing a bullish catalyst, at least for now. A rush into the earnings announcement suggests that we could see some profit-taking on the popular retail name.
In addition, today’s three big stock charts analyzes the charts of the big box retailer with two charts that should have the bulls worried, Charter Communications, Inc. (NASDAQ:CHTR) and American Airlines Group Inc (NASDAQ:AAL).
Home Depot Inc (HD)
Home Depot shares are rallying more than 1.5% after the company announced earnings that beat on the bottom line. Revenues were in-line and the company provided an in-line outlook for the next fiscal year. In other words, nothing spectacular.
Looking at the chart, there is some concern that HD shares could see some pressure as traders may be more likely to “sell the news” after the report.
For the two trading days, Home Depot shares rallied almost 2% ahead of the report, taking the stock right back to $160, which has served as chart and round-numbered resistance for the shares recently. This move also returned the stock to its all-time highs.
The short-term rally in HD shares also returned the stock to short-term overbought conditions as the RSI for the stock is once again breaching the $70-level. In recent past, the stock has struggled to move sideways after similar readings.
At this point, the charts suggest that the “sell the news” crowd is likely to take some profits off of the table, resulting in a short-term pullback to $150. At this point, support from the rising 50-day moving average should step into support the stock and attract new technical buyers to help push Home Depot shares back into new high territory.
Charter Communications, Inc. (CHTR)
Charter Communications has slumped into an oversold reading after the company’s disappointing earnings report on May 2. The bearish move places CHTR stock in a technical must-win position that is worth monitoring over the next week.
First, from a trendline perspective, the stock’s current prices are challenging the 100-day moving average. This trendline currently resides at $321.
Second, Charter Communications broke through its 50-day trendline shortly after the earnings miss. This has resulted in a transition from bullish to bearish intermediate-term conditions based on the movement of the 50-day. A continuation in the erosion of this trendline will apply selling pressure to CHTR shares.
Finally, Charter shares are resting on strong chart support at $320. This level has long been a site of support for the stock as it traded sideways with little-to-no volatility in early 2017. A break below this price point will accelerate selling pressure and target a move to $300.
American Airlines Group Inc (AAL)
Airline stocks continue to lag the market as headlines and the ire of consumers plague the stocks on what feels like a daily basis.
Shares of American Airlines have once again rallied, quickly, from chart support at their 200-day moving average. In early May, AAL shares hit this trendline, currently around $42 and found support from the technical community as buying volume perked-up quickly.
Now, American Airlines stock has hit $47, which has been staunch chart resistance for the stock since February. As the chart above shows, selling volume has risen on each of the recent approaches to this price.
Technical bulls can eye the trend of the 50-day moving average as a potential sign that AAL stock could takeout the pesky $47-level this time around. As of the last week, this trendline has started to transition into a potentially bullish pattern as it begins to slightly rise.
The transition in the 50-day suggests that we may find more support for American Airlines, but likely after a short-term pullback that could target $45.
As of this writing, Chris Johnson, Johnson Research Group did not hold a position in any of the aforementioned securities.