Don't Ignore This Chart!

Watch this Key Stock for Clues on Housing and Retail


Home Depot is the perfect cyclical stock because it sits at the crossroads of retail, housing and the consumer. The stock was a poster child of the bull market with a 200+ percent gain from 2013 to 2015. It did not stop there and even managed to hit new highs into 2016. More recently, HD fell on hard times the last few months with a move below the June low and relative weakness since May. Notice that the price relative peaked in May and the StockCharts Technical Rank (SCTR) has not been above 60 since early May. 

Even though the current evidence is bearish, I am watching HD closely because it surged over 7% last week and quickly recovered after the lower low. This is potentially bullish price action because it created a "bear trap", which is essentially a failed support break. Even though the bear trap is positive, the stock has yet to follow through and remains an underperformer. I am looking for a weekly close above resistance at 131 for a breakout on the price chart and an SCTR move above 60 to signal a return to relative strength. Such a move would suggest that retail, housing and the consumer are back. 

Thanks for tuning in and have a great day!
--Arthur Hill CMT

Plan your Trade and Trade your Plan

Arthur Hill
About the author: , CMT, is the Chief Technical Strategist at Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London. Learn More
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