Stocks continued to see a bid on Wednesday, led by the energy and transportation segments. Outside of this one stock that caught my attention was Home Depot Inc (NYSE: HD) as it popped 2.82% on the day. Barring a quick reversal of Wednesday’s fortune, HD stock now looks to be in position for a trade higher.
On April 3 in this here column I offered that HD was reaching a critical technical juncture in multiple time frames and that this, once confirmed by buying pressure could lead to a buy setup for the stock for active investors and traders to take advantage of.
With the rally on Wednesday the stock may have given the bulls what they need for a tradeable bounce.
Home Depot Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
For perspective, let’s review the bigger-picture multiyear weekly chart. Here we see that much in line with the broader market, HD stock began to steepen its chart in late 2017, which ultimately led to an unsustainably steep rally into the second half of January 2018. As broader market upside momentum began to fizzle the stock began a mean-reversion move to the downside along with the broader stock market.
On the chart, we see that so far, Home Depot stock reverted back to the upper end of its longer-standing trading channel, which through the lens of technical an analysis 101 is a logical spot where a bounce could occur. To be clear, however, for now this is more of a bounce rather than a sure-fire entry point from where the stock could rally to new sustainable higher highs anytime soon.
Moving averages legend: blue – 8 day, yellow – 21 day
On the daily chart we see that the rally on Wednesday pushed HD stock above its yellow 21-day simple moving average as well as out of a defined falling-wedge type of pattern marked by the black lines. While one day does not make a new trend, barring a quick reversal of Wednesday’s rally traders here could look to enter new long positions for a play higher into the high $180’s. Any strong bearish reversal on a daily closing basis would be a stop loss signal for this swing trade.
Home Depot is scheduled to report its next batch of earnings on May 15, and from where I sit any swing trades would be wise to be exited through the earnings announcement.
Check out Anthony Mirhaydari’s Daily Market Outlook for April 19.
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