Home Depot Undercuts and Holds Recent Low
Housing stocks like Home Depot pulled back hard in May as the real estate market slowed. However, the bears may be throwing in the towel.
The main pattern of interest on this chart is support materializing around $310. This was near the low on May 19, the same session that HD bounced at its 50-day simple moving average (SMA). It’s also near a price gap on April 5, immediately after the long Easter weekend.
While this price area isn’t very obvious, stabilization here could be bullish. After all, HD just broke support at its 50-day SMA. That should be bearish, but where are the sellers? Perhaps there are none.
Next, housing stocks were overbought a month ago and had a sharp pullback. (HD’s 7.1 percent crash on May 11-12 was its worst two-day drop in over a year.) But now volatility is ebbing.
Finally, stochastics have been in oversold territory.
The overall macro environment remains positive for housing. Interest rates have calmed and the economy continues to improve. Numbers like starts and sales were very weak in April, but the underlying supply/demand balance remains favorable. That may draw more buyers to HD in coming weeks if it remains above the $310 area.
TradeStation is a pioneer in the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
The main pattern of interest on this chart is support materializing around $310. This was near the low on May 19, the same session that HD bounced at its 50-day simple moving average (SMA). It’s also near a price gap on April 5, immediately after the long Easter weekend.
While this price area isn’t very obvious, stabilization here could be bullish. After all, HD just broke support at its 50-day SMA. That should be bearish, but where are the sellers? Perhaps there are none.
Next, housing stocks were overbought a month ago and had a sharp pullback. (HD’s 7.1 percent crash on May 11-12 was its worst two-day drop in over a year.) But now volatility is ebbing.
Finally, stochastics have been in oversold territory.
The overall macro environment remains positive for housing. Interest rates have calmed and the economy continues to improve. Numbers like starts and sales were very weak in April, but the underlying supply/demand balance remains favorable. That may draw more buyers to HD in coming weeks if it remains above the $310 area.
TradeStation is a pioneer in the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
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