Lowe's Companies, Inc. (LOW) shares rose more than 5% on Friday afternoon after Bloomberg reported that an activist hedge fund was building a stake. According to sources familiar with the matter, D.E. Shaw has started building an activist stake in Lowe's following the launch of its new activist platform under portfolio manager Quentin Koffey, who previously worked at Paul Singer's Elliott Management Corp.
While the activist hedge fund's specific plans weren't immediately apparent, Lowe's has been struggling to compete with The Home Depot, Inc. (HD) and continue its momentum following hurricanes Harvey and Irma, which boosted third quarter same-store sales. D.E. Shaw has previously proposed spinouts and other actions at other public companies with the goal of increasing short- and long-term shareholder value. (see also: The D.E. Shaw Group: Investment Manager Highlight.)
From a technical standpoint, the stock broke out from both R1 resistance at $96.95 and R2 resistance at $100.97 before ending the session just below R2 resistance levels. The relative strength index (RSI) moved sharply higher into overbought territory, but the moving average convergence divergence (MACD) experienced a bullish crossover that could suggest more upside over the coming week.
Traders should watch for a sustained breakout from R2 resistance at $100.97 to potentially retest all-time highs at around $102.28. If the stock cannot break out from these levels, traders could see some consolidation between R2 and R1 resistance levels over the coming week. A breakdown from R1 resistance could lead to a move to lower trendline support at around $92.75, but the favorable fundamental developments suggest that there is more upside ahead. (For more, see: D.E. Shaw Takes Stake in Lowe's – CNBC.)
Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.