Home Depot Could Retest Its July Lows

 | Aug 17, 2017 | 10:56 AM EDT
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We reviewed the charts and indicators of Home Depot (HD)  early this month, and we worried about HD's ability to restart its uptrend, "Bottom line: The $150-$155 area on HD could become resistance, and the recent price recovery could stall. If prices fail to break through this resistance zone, fresh declines could follow."

Reviewing the charts again this morning, I can see that HD did encounter resistance in the top end of the $150-$155 resistance zone. See the daily chart, below. HD crossed above the declining 50-day moving average line and back below it. The daily On-Balance-Volume (OBV) line is turning down again at a lower high than July. The Moving Average Convergence Divergence (MACD) oscillator moved back up above the zero line, but is now curling over again.

The weekly bar chart of HD, below, has not changed much in the positive. Yes prices are still above the rising 40-week moving average line, but the weekly OBV line remains flat and does not suggest or signal a more-aggressive stance by HD buyers. The trend-following MACD oscillator on this weekly timeframe is still bearish and pointed down towards the zero line.

In this Point and Figure chart of HD, below, we can see how prices have stalled in the $152.44 to $158.62 area. This chart projects a $130.88 downside price target, but support can be seen around $135.

Bottom line: Since May, HD has made three rally failures -- mid-May, mid-June and mid-August -- each one stopping at a lower high. I consider this a weakening pattern and I would be prepared for a retest of the July low around $145. A close below $145 could open the way for further declines to around the $135 area.

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