If you want a read on the true state of our economy, stop listening to macro trends and start listening to Home Depot Inc. (HD) , Jim Cramer said on Real Money Tuesday. HD is the perfect microcosm of economic demand, Cramer noted, and the company had a lot to say this quarter.
HD delivered blockbuster quarterly earnings, and the company confirmed on its conference call that the consumer is alive and well and spending continues to rise. Not all was rosy on the conference call, however. Management acknowledged that the consumer is beginning to lose confidence as the impact of tariffs begins to take hold.
I looked at HD just the other day but noted that, "In this Point and Figure chart of HD... we can see a possible downside price target of around $188. A rally to the $211.69 area is needed to improve the picture." HD rallied to fill in "X's" on the Point and Figure chart up to $215.94 and the chart (below) now shows a possible upside price target of $250. With prices higher in pre-market trade Wednesday let's look further.
In the daily bar chart of HD, below, we can see that prices gapped above the rising 50-day moving average line Tuesday. HD closed near the high of the day, which tells us that profit-taking was not prevalent.
Volume was heavy and the On-Balance-Volume (OBV) line turned higher. The Moving Average Convergence Divergence (MACD) oscillator is crossing to the upside from below the zero line for a cover shorts buy signal.
In the weekly bar chart of HD, below, we see the strength so far this week. Prices are in striking distance of a new high for the move up. HD is above the rising 40-week moving average line.
The weekly OBV line needs more strong days to get it to make a new high. The 12-week price momentum study moved to a new high for the recent move up.
In this updated Point and Figure chart of HD, below, the price strength flipped the chart from a bearish price target to a bullish target of $250.
Bottom-line strategy: You have to love the challenge of the marketplace otherwise an overnight swing from bearish to bullish would drive you crazy. Though I am still bearish on the broader market, HD is showing independent strength for now. If you want to go long HD or add to longs I would wait for a few days of sideways price action before probing the long side. A close below $200 is your risk point now.