Jim Cramer continued with his stock picker's market theme with his Mad Money viewers Monday. He noted that we're in the middle of one of the best housing markets ever as people upgrade to homes away from the city with plenty of space for home offices and studies. That's great news for all of the homebuilders and home-related stocks like Home Depot (HD) .
Let's check out the charts and indicators.
In this daily bar chart of HD, below, we can see that prices peaked in August and declined slowly into early December. HD bounced in the middle of December and made a slightly higher low in January to shift the trend from down to sideways. Prices have rallied in January to best the December high and establish an uptrend - higher lows and higher highs. Prices are now trading above the bottoming 50-day moving average line and the rising 200-day line.
The On-Balance-Volume (OBV) line has strengthened this month and the Moving Average Convergence Divergence (MACD) oscillator has just crossed above the zero line for an outright buy signal.
In this weekly bar chart of HD, below, we see a bullish picture. Prices touched/tested the rising 40-week moving average line earlier this month. In hindsight this was very likely a buying opportunity.
Prices are in an uptrend and the OBV line has made a new high ahead of prices - a good sign that the price strength is likely to continue. The MACD oscillator is ready to cross to the upside for a new buy signal.
In this daily Point and Figure chart of HD, below, we can see that a trade at $293.97 is an upside breakout. We also see that the software is targeting $314 as an initial price target.
In this weekly Point and Figure chart of HD, below, we can see the $331 area as a potential price objective.
Bottom line strategy: Traders should try to buy a dip towards $280 risking to $265. Add to longs above $294. Look for $314 and then $331 as price targets.