Home Depot Reported Strong Earnings—Here’s How To Trade The Stock Now

Home Depot

HD
reported better-than-expected second quarter earnings per share and revenue. The stock is trading lower on the lack of forward guidance. Despite reporting its highest revenue quarter ever, shares opened below its monthly pivot at $326.56 and then slipped below its 50-day simple moving average at $320.75 and its quarterly pivot at $319.58. The stock traded as low as $317.52 as of 10:25 a.m. on August 17. Its semiannual value level is $308.23.

The home improvement giant touted the solid housing market and home improvement spending. While the number of consumers in the stores were below expectations, the average ticket sale rose by 11.3% to $82.48 per visitor.

Home Depot has a p/e ratio of 24.01% and a dividend yield of 1.99% according to Macrotrends. The company has now beaten earnings-per-share estimates in five consecutive quarters.

The Daily Chart for Home Depot

Shares of Home Depot have been above a golden cross for more than 52 weeks. The stock traded lower until reaching its 52-week low of $246.59 on March 5. Note how the stock could be bought at its 200-day simple moving average at $268.11 on February 23.

The pop above the 50-day and 200-day SMAs on March 12 fueled a momentum run-up to the May 10 high of $345.69. The decline found some stability around the 50-day SMA until today.

The highest horizontal line is this week’s risky level at $349.27, which is highly unlikely to be tested. The second horizontal line is the monthly pivot at $326.56, which failed to hold today. The third horizontal line is the quarterly pivot at $319.58, which has been today’s magnet. The fourth and fifth horizontal lines are the semiannual value level at $308.23 and the annual value level at $285.84.

The Weekly Chart for Home Depot

The weekly chart for Home Depot is neutral with the stock below its five-week modified moving average at $323.52. It’s well above its 200-week simple moving average or reversion to the mean at $228.00. The 12x3x3 weekly slow stochastic reading is rising slightly at 67.41.

Trading Strategy: Buy Home Depot on weakness to its semiannual and annual value levels at $308.23 and $285.84, respectively. Reduce holdings on strength to its monthly pivot at $326.56 and to the August 16 low at $327.97.