Morning Comment: HD's Chart Now Looking Dicey


In our full edition of the "Morning Comment," we touched on the following subjects:


  • Most people liked yesterday’s midday bounce. We did not. It shows there’s too much complacency out there.
  • The market is overbought after its big 2019 & 4th quarter rallies. This new-news should cause a pull—back.
  • This is especially true given that last year’s rally was not fundamentally based.
  • Pull-backs CAN take place while the Fed is engaged in QE programs.
  • Are the Saudi oil fields a likely target once again?
  • Nice bounce in the housing stocks yesterday. Can the ITB breakout of another sideways range to the upside?
  • HD’s recent action has been poor. A compelling break below its 200 DMA will be quite negative.
  • Stock picking should be key this year.


Here are the details of one of these bullet points:

HD’s recent action has been poor. A compelling break below its 200 DMA will be quite negative.

However, not all of the members of the ITB act well. One that concerns us is HD. We made a bullish short-term call on the stock in December. After a slight (further) decline, the stock bounced nicely off of its 200 DMA…rising more than 8% into the Christmas holiday. However, that rally lost some steam…and thus it has changed our thinking on the stock.

HD has still not retraced much of what it lost in November (after its most recent earnings report). This raises concerns in our minds that HD will not be able to hold its 200 DMA the next time it tests that line. Since the 200 DMA has provided VERY good support for the stock over the past nine months…and has been a key level in both directions for two year…any meaningful break below that line will be quite negative on a technical basis. In other words, the 200 DMA has provided both tough resistance and strong support over the past two years, but whenever it finally breaks above or below that line, the move tends to be a powerful one.

Right now, the 200 DMA is providing support…and it comes-in at the $214.25 level. We’d also note that the lows in December were $210. So if HD breaks below $210 in any significant manner…thus giving it an important “lower-low” (on top of breaking below its 200 DMA)…it’s going to raise a BIG red flag on the stock…….As always, we have to wait for a break below that key $210 level before we turn bearish on the stock, but the weak bounce in December (when the rest of the market was rallying strongly) has raised some serious concerns in our minds. Therefore, changed our stance on the stock…due to the change in recent action in the stock.



For the details on the rest of our comments this morning...and to get these kinds of comments on a daily basis, please click here to subscribe to "The Maley Report (TheMaleyReport.com).




Matthew J. Maley

Managing Director

Chief Market Strategist

Miller Tabak + Co., LLC

Founder, The Maley Report

TheMaleyReport.com

275 Grove St. Suite 2-400

Newton, MA 02466

617-663-5381

mmaley@millertabak.com


Although the information contained in this report (not including disclosures contained herein) has been obtained from sources we believe to be reliable, the accuracy and completeness of such information and the opinions expressed herein cannot be guaranteed. This report is for informational purposes only and under no circumstances is it to be construed as an offer to sell, or a solicitation to buy, any security. Any recommendation contained in this report may not be appropriate for all investors. Trading options is not suitable for all investors and may involve risk of loss. Additional information is available upon request or by contacting us at Miller Tabak + Co., LLC, 200 Park Ave. Suite 1700, New York, NY 10166.

Posted to The Maley Report on Jan 07, 2020 — 7:01 AM
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