Exit The Home Depot, Inc. (NYSE:HD) If Closes Below $75
Denver, CO, 08/16/2013 (Avauncer.com) – The Home Depot, Inc. (NYSE:HD) (Closed: $75.14, Down: 2.97%) opened gap down on Thursday and never really recovered any of its losses, settling at the lows by the close. The volume at 14 million was nearly double than the average volume of 7 million. It was the second straight session of big loss in the stock.
The stock had made its major bottom at $8 in 1995 when it had hit the 1993 bottom at the same level, creating a Double Bottom. The next huge rally took the price to $70 levels by 1999. After hitting the $70 repeatedly in the next few months, the stock began its descent. The Double Top at $70 turned out be a major top as it lost 80% of its value by 2003. After an attempt to recover, it made a fresh low at $17.05 in 2008 which proved to be the final bottom. The next major rally took the price to a new life high at $81.56, breaking the major resistance of $70. The price action in the period of 2005 – 2011 created a nice Cup & Handle pattern with the neckline at $39. The breakout was explosive and the subsequent rally has taken the price too much too fast. This rally from the 2011 bottom of $28.13 is perfectly contained in a rising channel. The price tried to overshoot it in May 2013, but failed to sustain above it and returned inside by June.
Yesterdays fall has taken the price to the lower boundary of this channel and the price made a low exactly on that line. A break of this channel would be a confirmation of the termination of this rally. The best case then would be a creation of a multi-month range but at worst it can take the price to the $66 - $68 levels fast, even $64.
Investors should exit if the stock closes below $75 today.