The Home Depot Inc. (HD) saw its shares slip early Tuesday on a small fourth-quarter sales miss and cautious guidance for its current fiscal year. Let's check the charts and indicators of the big home improvement retailer and Dow Jones Industrial Average component ahead of the opening of trading this morning.
In this daily bar chart of HD, below, I can see a picture that suggests weakness ahead. Prices have been in a large sideways pattern the past year. Prices have crossed the 50-day moving average line a number of times and a rally above the 200-day line has stalled. Trading volume does not show me a bullish trend but rather a lack of interest in recent weeks. Prices have been holding the $310 area in recent weeks but HD is poised to break that area on the opening Tuesday.
The daily On-Balance-Volume (OBV) has been stalled since the middle of December and the trend-following Moving Average Convergence Divergence (MACD) oscillator is weak and poised to move to a sell signal on a close below the zero line.
In this weekly Japanese candlestick chart of HD, below, I see a soft picture. Prices were trading above the 40-week moving average line but that indicator is likely to be tested in the days ahead. There are a number of upper shadows in the $340 area that tell me traders have rejected the highs and the path of least resistance is lower. The weekly OBV line shows only a slight improvement the past three months. The MACD oscillator has narrowed and is poised for a downside crossover and take profit sell signal.
In this daily Point and Figure chart of HD, below, I can see the price action through Friday. An upside price target is shown but a trade at $304 will refresh the downtrend and likely precipitate further declines.
In this weekly Point and Figure chart of HD, below, I can see a trade at $308.96 should turn the chart bearish.
Bottom line strategy: Traders should avoid the long side of HD for now. Support may develop in the $280 area but I am in no rush to make a buy recommendation.
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