Shares of Home Depot (HD) made a small double-top formation in December and January, before starting a decline into May. The pace of the decline has slowed and that has captured my attention. Let's check out the latest charts and indicators.
We looked at HD on May 17 and wrote that "Aggressive traders could probe the long side of HD at current levels risking to $275. A rally towards the $364 area could unfold in the weeks ahead."
Buyers of HD should still be long.
In this daily bar chart of HD, below, we can see that prices have stabilized and are trying to push higher. Prices are still trading below the declining 50-day moving average line but the next push higher is likely to break this indicator. The daily On-Balance-Volume (OBV) line is steady to slightly improving. The 12-day price momentum study shows higher lows from January to May telling us that the pace of HD's decline has slowed down and this can foreshadow a turn to the upside.
In this weekly Japanese candlestick chart of HD, below, we can now see the three most recent candles with lower shadows. Lower shadows tell us that traders are rejecting the lows and that is how bases get established. The weekly OBV line shows stability or a balance between buyers and sellers. The Moving Average Convergence Divergence (MACD) oscillator has narrowed in recent weeks, which tells us that the "trend strength" is improving and we are getting closer to a cover shorts buy signal.
In this daily Point and Figure chart of HD, below, we can see an upside price target of $324.
In this weekly close only Point and Figure chart of HD, below, we can see a downside price target in the $281 area.
Bottom line strategy: Traders who bought HD because of our May 17 recommendation should continue to hold those positions. Add to longs on a close above $300.
