HD: RECTANGLE PATTERN AND FULL TECHNICAL ANALYSIS
Updated
HD (HOME DEPOT):
Consumer Cyclical - Home Improvement Retail.
Home Depot is included in the Down Jones Industrial Average.
My technical analysis on the stock:
The current downtrend took the stock 37% of its all time high of January 2022.
On June 23, HD initiated a strong bounce to $333 off the $265 level.
On August 17, HD initiated a huge drop back to 265, to bounce back again to the 330 zone where we currently are.
The stock is currently down 22% off its all time high.
Is this a buy?
No one knows, but let's look at technical analysis to help us make a decision.
As we see from the chart, the 265-269 zone is acting as a strong support while the 328-333 zone is acting as a strong resistance.
All of the above has created a nice range in the shape of a rectangle.
A rectangle is formed when the price is confined to moving between the two horizontal levels, creating a rectangle.
The pattern can indicate a few things:
- that the downtrend has paused and the stock is now consolidating before a continuation down. So back at the bottom of the rectangle and break down.
- that the downtrend has stopped and we're looking at a change of trend. Kind of bottoming pattern. So basically it can keep ranging for a while and break to the upside OR break to the upside in the next few days.
The rectangle ends when there is a breakout, and the price moves out of the rectangle.
Considering the above there are several ways to trade it:
1. If you think the price will keep consolidating within the range, you can short the stock at the top of the range. Your target is the bottom of the rectangle, with a stop just above the rectangle.
2. if you have a more bullish view, you can wait for a breakout off the rectangle and go long the stock, with a stop below the top line of the rectangle. All targets are mentioned on the chart (blue lines). Rectangle ultimate target being $400.
I'm leaning slightly bullish here because moving averages have started to rise, and I like the triple bottom, but who knows. Whatever your opinion is, best is to manage your risk.
Trade safe.
Consumer Cyclical - Home Improvement Retail.
Home Depot is included in the Down Jones Industrial Average.
My technical analysis on the stock:
The current downtrend took the stock 37% of its all time high of January 2022.
On June 23, HD initiated a strong bounce to $333 off the $265 level.
On August 17, HD initiated a huge drop back to 265, to bounce back again to the 330 zone where we currently are.
The stock is currently down 22% off its all time high.
Is this a buy?
No one knows, but let's look at technical analysis to help us make a decision.
As we see from the chart, the 265-269 zone is acting as a strong support while the 328-333 zone is acting as a strong resistance.
All of the above has created a nice range in the shape of a rectangle.
A rectangle is formed when the price is confined to moving between the two horizontal levels, creating a rectangle.
The pattern can indicate a few things:
- that the downtrend has paused and the stock is now consolidating before a continuation down. So back at the bottom of the rectangle and break down.
- that the downtrend has stopped and we're looking at a change of trend. Kind of bottoming pattern. So basically it can keep ranging for a while and break to the upside OR break to the upside in the next few days.
The rectangle ends when there is a breakout, and the price moves out of the rectangle.
Considering the above there are several ways to trade it:
1. If you think the price will keep consolidating within the range, you can short the stock at the top of the range. Your target is the bottom of the rectangle, with a stop just above the rectangle.
2. if you have a more bullish view, you can wait for a breakout off the rectangle and go long the stock, with a stop below the top line of the rectangle. All targets are mentioned on the chart (blue lines). Rectangle ultimate target being $400.
I'm leaning slightly bullish here because moving averages have started to rise, and I like the triple bottom, but who knows. Whatever your opinion is, best is to manage your risk.
Trade safe.
Note
top of the rectangle acting as a resistance as indicated in my analysis. For those who chose to short, congrats. Make sure you have a stop loss.Note
The break out of the rectangle was a signal to go long. HD has filled the 1st gap and has retested the break point. Long with stop below the rectangle line.
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