Home improvement giant The Home Depot, Inc. (HD) reported an earnings miss before the opening bell, the 19 May. The stock gapped lower on this news after the definition of its intraday high of $248.31 on May 18. The stock then stabilized above its semi-pivot at $226.94.
In the above, this component of the Dow Jones Industrial Average remained shy of its annual risky level at $249.87, which is a warning. The stock ended last week at $241.88, up 10.8% year to date, and in the bull market territory, at 72% above its March 18 low of $140.63. Home Depot stock is 2.6% below its record high of $248.31 set on May 18.
Fundamentally, the stock is not cheap, as its P/E ratio is 23.94 with a dividend yield of 2.49%, according to the trends. Selling pressure was caused by the fear that consumer spending will be slow as the virus continues to spread. In my home country, in Florida, cases have reached a new high on May 23 at 50,127.
The daily chart for Home Depot
Refinitiv XENITH
Home Depot stock with a gold cross, which was confirmed on April 12, 2019. This buy signal is produced when the 50-day simple moving average rose above the 200-day simple moving average to indicate that higher prices will follow. When above a cross of gold, the strategy is to buy weakness to the 200-day simple moving average. This opportunity to purchase last occurred on Dec. 16, while the average was $211.92.
Home Depot stock traded as high as $247.36 on Feb. 21 and then in a cascade of less than $140.63 March 18. In this accident, the stock has failed to hold its semi-annual pivot at $226.94 on 10 March. The 200-day simple moving average, has sold on 11 March.
After the March 18 low of $140.83, there is a V shape at the bottom. By 27 April, the stock tested its 200-day simple moving average at $219.88. The quarterly pivot at $221.26 has been adopted to increase, the 4 May.
The semi-pivot at $226.94 become a pole of attraction between the 5 May and 14 May. Then came the peak until May 18, at the top of $248.31. He has a fear of the annual risky level at $249.87.
The weekly chart for Home Depot
Refinitiv XENITH
The weekly chart for Home Depot are positive, with above its five-week modified moving average at $222.93. The stock is also above its 200-week simple moving average, or “mean reversion”, to $181.52. Its 12 x 3 x 3 weekly slow stochastic reading rose to 77.35 last week, up 70.24 May 15.
Trading strategy: Buy Home Depot stock on weakness to its semiannual and quarterly pivots at $226.94, and $221.26, respectively, and reduce holdings on strength to its annual risky level at $249.87.
How to use my value levels and risky levels: The share price closing price on Dec. 31, 2019, has been an entry to my proprietary analytics. Half-yearly and annual, the levels are still on the charts. Each calculation uses the past nine closes in these time horizons.
The second quarter of 2020 the level has been established based on the 31 March, close by, and the level of the month of May was established based on the April 30 close. New weekly levels are calculated following the end of each week, while new quarterly levels occur at the end of each quarter. Half-yearly levels are updated at mid-year, the levels are set throughout the year.
My theory is that nine years of volatility between the farm are to assume all possible bullish or bearish event for the stock are taken into account. To capture the volatility of stock prices, investors should purchase shares of the weakness of a plan, the value and reduce the holdings of the strength to a risky level. A pivot is a level value of the risk level that was violated in its time horizon. Hubs act as magnets that have a high likelihood to be re-tested prior to their time horizon expires.
How to use 12 x 3 x 3 weekly slow stochastic readings: My choice of using 12 x 3 x 3 weekly slow stochastic readings has been based on the backtesting of many methods of reading the stock prices of the momentum with the objective of finding the combination that resulted in the least number of false signals. I’ve been following the stock market crash of 1987, so I was happy with the results of more than 30 years.
The stochastic reading covers the duration of 12 weeks, high, low, and close for the stock. There is a row of calculation of the difference between the highest and the lowest compared to the farm. These levels are modified for a fast reading and slow reading, and I found that the slow playback will work best.
The stochastic reading scales between 00.00 and 100.00 with readings above 80.00 considered as overbought and readings below 20.00 regarded as oversold. A reading above 90.00 is considered to be a “swell parabolic bubble” of the training, which is usually followed by a decline of 10% to 20% over the next three to five months. A reading below 10.00 is considered to be “too cheap to ignore”, which is usually followed by a gain of 10% to 20% over the next three to five months.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Source: investopedia.com
