After hitting an all-time high, at 219.09, on July 15th, the Home Depot Inc stock (NYSE: HD) formed a double top, with the second “head” being at the high of July 30th. From there onwards, the share price started declining, which led to a break of the so-called “neckline”, at 211.11. The break happened yesterday, when HD opened with a gap to the downside. The stock continued to drift all the way to the low of June 25th, near 204.18, which held it from falling lower. Overall, Home Depot stock is still above its medium-term tentative upside support line drawn from the low of March 15th, which could be seen as a positive in the medium-term. But given that the share price broke its key important support zone, at 211.11, we believe there might be some more downside to come, at least in the short run.
A drop below the 204.18 hurdle could continue putting pressure on the stock, which may slide, not only to the 200 EMA on the 4-hour chart, but also to the 200.71 obstacle, which is the high of June 11. If there are still no new buyers joining in at that price, a break of the 200.71 zone may push HD to the 198.23 area, marked by the low of June 13th. Around there, the stock might take a break from falling, or even correct slightly higher. That said, if HD struggles to overcome the 200 EMA, we could see another slide, potentially bringing the share price closer to the 195.80 hurdle, or even to the 194.78 level, which are marked by the lows of June 11th and June 7th respectively.
Our oscillators are showing accelerating downside speed, which supports the idea that there could be further moves lower for the price. The RSI is now closer to its 20 mark and the MACD has shifted below zero. At the same time the indicator is below its trigger line and points to the downside.
Alternatively, if we see HD reversing sharply and pushing back above the “neckline”, at 211.11, this might interest some new investors, as such a move could increase the stock’s chances to drift higher again. We will then examine the next potential resistance obstacle, at 213.11, a break of which may lead the share price to the 215.94 zone, marked by the high of August 1st. If the buying doesn’t end there, a further price-acceleration could lift the stock closer to the all-time high level, at 219.09.
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