The Home Depot, Inc. (HD) is the premier home improvement retail giant and is a component of the Dow Jones Industrial Average. The stock is recovering from a correction of 18% from its 2018 high of $207.60 to its 2018 low of $170.42 set on April 4. Home Depot shares closed Thursday at $187.16, down 1.3% year to date and down 9.8% from its Jan. 29 high of $207.60, but the stock is up 9.8% from its April 4 low of $170.42. The company is set to report quarterly earnings before the opening bell on May 15.
Analysts expect Home Depot to report earnings per share of $2.07 for the quarter. The company has a five-year history of reporting better-than-expected earnings. This track record has been in play as the stock set its all-time intraday high of $207.60 on Jan. 29. Look for the company to beat on earnings and revenue, but that does not guarantee a positive stock price reaction, as margins are being squeezed. (See also: Why Home Depot May Plunge 20% Off Its Highs.)
The daily chart for Home Depot
The daily chart for Home Depot shows that the stock has been above a "golden cross" since Jan. 19, 2017, when the shares closed at $135.39. A "golden cross" occurs when the 50-day simple moving average rises above the 200-day simple moving average and indicates that higher prices lie ahead. During the 2018 correction into the low of $170.42, the stock stayed just above its 200-day simple moving average of $170.23 on that day.
The horizontal lines show that Home Depot is between my annual and semiannual pivots at $186.99 and $189.56, respectively. Above and off the chart is my monthly risky level of $212.29. Below is my quarterly value level of $177.74.
The weekly chart for Home Depot
The weekly chart for Home Depot is positive, with the stock above its five-week modified moving average of $182.18. The stock is above its 200-week simple moving average, also known as the "reversion to the mean," now at $133.85, which was last tested during the week of Aug. 12, 2011, when the average was $28.79. The 12 x 3 x 3 weekly slow stochastic reading is projected to end this week rising to 44.01, up from 30.06 on May 4.
Given these charts and analysis, investors should buy Home Depot shares on weakness to my quarterly value level of $177.74 and reduce holdings on strength to my semiannual pivot of $189.56. My annual pivot is $186.99, with my risky level for May at $212.29. (For more, see: 5 Consumer Stocks Ready for Big Rebounds.)