During Tuesday's Mad Money program Jim Cramer said we're in a brave new world and only a handful of companies have figured out this new economy. Home Depot Inc. (HD) is one of them, which he discussed in his Real Money column, "The Cost of Staying Closed".
Let's check out the charts of HD.
In the daily bar chart of HD, below, we can see that prices have nearly regained their entire decline from the peak in February. Impressive. Prices are above the bottoming 50-day moving average line and above the slightly rising 200-day line.
The On-Balance-Volume (OBV) line shows a slow grind higher from March but the decline from February to March was not that deep.
The Moving Average Convergence Divergence (MACD) oscillator moved above the zero line last month for a buy signal but recently the two moving averages that make up this indicator have begun to narrow. This tells us that the strength of the rally is beginning to fade.
In the weekly bar chart of HD, below, we can see a mixed picture. Prices have rallied back and are now trading above the rising 40-week moving average line. The weekly OBV line is leading the price action as it has already made a new high for the move up. Hopefully the OBV line's strength is foreshadowing future price strength for HD.
The MACD oscillator has crossed to the upside for a cover shorts buy signal. An outright buy signal with the indicator crossing the zero line may not be far off if prices continue to rise.
In this Point and Figure chart of HD, below, we can see a potential upside price target of $265. A trade at $248 is needed to refresh the uptrend.
Bottom-line strategy: HD looks to be in good shape on the charts. Just one thing concerns me -- the rally from the March low has been steep. Traders looking to go long HD should wait for a correction to the $220-$215 area. Risk a close below $210.
