The Home Depot, Inc. (HD) has moved up from its April low and this past month was knocking on its prior peak in January. The charts and indicators are in a position where prices could retreat and market watchers could call it a double top or we could see an upside breakout. Let's check our home improvement charts.
(For more on HD, see: When Sellers Walk Away: Cramer's 'Mad Money' Recap.)
In this daily bar chart of HD, below, we can see that prices are just slightly above the rising 50-day moving average line. With the level of trading volume lower in July than June it would not surprise me that HD broke below the 50-day average line. The bullish 200--day line is rising and intersects down around $185. The 200-day line was successfully tested in early April.
The daily On-Balance-Volume (OBV) line shows an interesting bearish divergence. As prices made higher highs in July the daily OBV line made a lower high. The OBV line did not confirm the price strength and could be foreshadowing weakness ahead.
The trend-following Moving Average Convergence Divergence (MACD) oscillator also shows a divergence as it made a lower high in July than June. The MACD oscillator has been in a bearish mode since the middle of June and a decline below the zero line would be an outright sell signal on this shorter time frame.
In this weekly bar chart of HD, below, we can see that prices have been rising for the past three years and HD is above the bullish 40-week moving average line. If we only looked at prices we would be bullish on HD but volume also comes from the marketplace and tells us important information about the intensity of the buying.
The weekly volume chart below the price chart shows that volume has diminished all year. The weekly OBV line is also in a decline. Rising prices and contracting volume is not a sign of a healthy and robust chart. Expanding volume would be much more bullish.
The weekly MACD oscillator is poised to cross to the downside. A downside cross when the indicator is above the zero line is considered a take profits sell signal and not an outright sell or even a go short signal.
In this Point and Figure chart of HD, below, we can see that prices have reached an upside price target. A trade up at $205.46 would be a bullish breakout but a decline to $191.64 would weaken the chart.
Bottom line: Decisions, decisions. HD is not all that far from breaking out above its January zenith but it does not display the technical signs I like to see for making a commitment to the long side. I know you cannot make money by being out of the market but with HD I do not see a clear reason to be involved right now. Let's keep HD on our shopping list and visit the charts again real soon.