Home Depot (HD) was reviewed back on October 13 when I wrote that "I seriously doubt that my small purchases will cause HD to break out on the upside, but someone has been buying it, and I recommend new purchases of HD at current levels and above $345. Risk to $325. $412 is our target for now."
HD has reached our $412 price target so the question is do we take the gains and run? Let's check the charts again.
In this updated daily bar chart of HD, below, we can see that prices broke out on the upside shortly after our recommendation. Prices rallied into late October and then consolidated those gains for a few weeks before another rally into December. HD is trading above the rising 50-day moving average line as well the rising 200-day line. The training volume looks like it has picked up since the middle of November.
The On-Balance-Volume (OBV) line shows a bullish rise while the Moving Average Convergence Divergence (MACD) oscillator has turned to the downside. The issue I have with the rally of HD is that the base patterns or consolidation patterns have become shorter and shorter, telling us there is less and less accumulation (buying) before each rally. I do not see this as a healthy development.
In this weekly Japanese candlestick chart of HD, below, we can see a recent upper shadow on a spinning top followed by a possible doji. I am on high alert for a bearish confirmation after the doji.
The slope of the 40-week moving average line is still positive and so is the weekly OBV line. The MACD oscillator is bullish.
In this daily Point and Figure chart of HD, below, we can see the rally and that the software now projects the $590 area as a new potential price target.
In this weekly Point and Figure chart of HD, below, we can see our $412 price target has not changed.
Bottom line strategy: My local Home Depot store has been busy and the charts are still pointed up - for now. Traders should nail down some profits now that our $412 price target has been reached and a doji pattern has appeared on the weekly candle chart.
