HD Update – October 23, 2017 …

HD is acting pretty well today considering the tape is just kind of choppy.  The 15-min and 65-min chart resistance ATR’s have been broken today, so I decided to take a closer look to see if I should be looking to positionally or swing-trade HD here soon.  There next quarterly report is not due until Nov 21st, so maybe we are about to start a ramp into earnings, which often happen in large-cap market darlings.  Here are the charts …

HD – 15 & 65 Minute Charts

Breaks in the ATRs on the 15 & 65-min charts are typically the first signs to watch for when the bigger time frame bull/bear flags (i.e., consolidation patterns) are in the process of being broken.

HD – 195 Minute Chart #1

The 195-min ATR resistance level is at $166.00 and has yet to be broken on a candle closing basis … More importantly to me is the relative strength vs the SPY ETF indicator.  I have set an audio alert for when that R/S consolidation pattern has been broken.

What about the bigger time frames?  If we break higher, should traders be looking to swing trade this or possibly just positionally trade it (i.e., 3-5 day trade)?

HD – Monthly Chart

The monthly chart shows how great it has been to buy and hold HD since the last ATR break in January 2011 ($35.28 was the ATR resistance level).  Obviously, no trader in the world could expect the same type of expansion move on the monthly chart from the current levels.  The trend strength histogram has actually been in the Chop Zone since June 2016 … should we expect it to break-out higher in the next little while?  I think the odds are against that …

HD – Weekly Chart

The weekly chart’s price move is still well intact inside the broadening price pattern … price would have to break below the weekly ATR support level at $152.69 to show signs that the price pattern is in jeopardy.  Note that the trend strength histogram is showing negative divergence here as of late.  So is the price momentum/squeeze indicator.  The Moving Average Spread indicator is possibly making a lower high 2nd cross-over – that is a bit of a leap of faith here though because the indicator is still pointed higher in the short-term.

HD – Daily Chart

If the weekly chart is going to start to weaken, then the shorter-term charts will need to find resistance at logical levels here in the next while … the daily chart’s broadening price pattern shows a logical area of resistance at the upper parallel line.  Will that be where price fails on the current short-term chart push higher?

HD – 195 Minute Chart #2

You can see that price has made 3 pushes higher on the above 195-min chart … with trend price structure often completes after the 3rd wave, not always, but typically you will see that over and over.  On smaller time frame charts, you will sometimes actually see a 3rd wave high that produces dark blue “extreme” trend strength candles … sometimes, that will mark the high, but sometimes, price is not complete on the bigger time frame chart and you will actually see one final push in price up to a new minor high on the smaller-time frame chart.  Are we about to witness that type of final push to a new minor high on the 195-min chart that gets price up to an important daily time frame resistance level (i.e., upper parallel line on the broadening price pattern)?  I think there is a good chance of that being the case here in HD.

HD – 195 Minute Chart #3

That push to the daily resistance level would get the 195-min chart’s price structure right into the 1.272x – 1.618x extension target zone.

Bottom Line – I think that it makes sense to day-trade HD on bullish set-ups here as we push into that $168.25 target zone, but that any long holders of HD should consider taking profits or buying some insurance at those levels.  I will actually be looking at whether or not selling OTM call spreads makes sense given the price action that exists as we push into that zone.

Cheers … Leaf_West

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