We talked about Home Depot (HD) in Kamich's Korner at the end of June. We noted that, "Home Depot Inc. (HD) made a high in May and then retested that high earlier this month. After doubling in price over the past three years it may be time to shift one's stance on this member of the Dow Jones Industrial Average (DJIA)."
At the end of our analysis we summed up our thoughts this way: "The chart of HD does not show a huge top pattern but prices can still be vulnerable. Longs should examine their cost basis and their stop loss orders." With today's 4.4% slide I hope readers took action before today. Let's take a fresh look at the charts and see what damage has been done.
In this updated daily bar chart of HD, below, we can see that prices have broken some support around $150 and the $150 to $160 area should now act as resistance. The slope of the 50-day moving average is bearish and the intersection of the rising 200-day moving average line is not that far below the current market. The On-Balance-Volume (OBV) line has been weakening since mid-May telling us that sellers of HD have been more aggressive. The Moving Average Convergence Divergence (MACD) oscillator is in a bearish configuration below the zero line.
This weekly bar chart of HD, below, does not have today's price action but we can imagine that prices are a lot closer to the rising 40-week moving average line. The weekly OBV line has been flat for months and failed to confirm the price strength in HD for many months. The weekly MACD oscillator has turned down for a take profits sell signal in early June.
This Point and Figure chart of HD, below, shows the recent breakdown and a potential downside price target of $132.61. With support visible in the mid-$130s this target may be too bearish.
Bottom line -- I love it when technical analysis can spot risky or rewarding opportunities. A close below $145 on HD could open the way to declines to the $140 area.