Out Front Of HD's Price Reversal
by Mike Paulenoff
May 23, 2021 • 10:54 AM EDT
After Home Depot (HD) announced earnings on Tuesday that beat the Street on most of the important metrics, goosing the stock to the 327.25 area, Mike Paulenoff cautioned MPTrader members.
He briefly discussed HD's near-term technical set up, which looked promising as long as HD held support above 315.21, but then added:
"From a Bigger Picture perspective, my work presents some less promising prospects for HD's potential upside price path. Let's notice on my attached Daily Chart that the last time HD's Price AND Momentum hit confirming new highs was on April 16th. The subsequent new ATH in price at 345.69 on May 10th was NOT CONFIRMED by Daily Momentum, and as such, represents a glaring non-confirmation that serves as a warning signal to anyone who is camped-out in an entrenched long position -- that the power driving HD higher has dissipated, and continues to dissipate as price moves higher."
Later that day, HD reversed sharply, closing lower on the session, injecting serious negativity into Mike's near and intermediate technical work.
The poor performance of HD's stock did not go unnoticed by HD management. On Thursday afternoon after the close (at 315.90), HD "surprised" The Street by authorizing a new $20 billion share repurchase program.
On Friday, after popping higher to 319.28, HD closed the session lower, at 315.77, despite the influence of Tuesday's strong earnings report and Thursday's stock buyback announcement.
HD's poor stock performance certainly appears to be reflecting Mike's problematic "bigger picture" technical set-up.
What's next for the price of HD? Will it continue to hold above its 50 DMA (now at 313.80)? If not, to what target zones does Mike's work project weakness? Will HD weakness weigh on overall market direction?
Join Mike and MPTrader members for discussions about HD, as well as many individual stocks, ETFs, macro indices, cryptos, and commodities.
In our Top Call article a month ago, we told you about how Mike Paulenoff called AAPL's upside continuation, with the expectation that the stock could extend a little higher before upside exhaustion.
AAPL, indeed, went on to stair-step higher to reach a high of 157.26 high last week, overshooting the upper boundary of Mike's 153-156 projected high-zone by just 0.8%. It then proceeded to initiate the expected bout of weakness that accelerated to the downside this past Friday.
On August 11, Mike Paulenoff alerted MPTrader members to a significant upside reversal signal in AMZN.
Mike wrote that "the 500 point decline is nearing downside exhaustion," noting a preferred downside target zone of 3180-3200.
Fast-forward to August 20, when AMZN pressed to a new multi-month corrective low at 3175.76.
On August 3, Mike Paulenoff alerted MPTrader members to the developing setup in AAPL that also would eventually impact the broader market:
Mike wrote: "AAPL continues to levitate within a high level digestion period and pattern off of its ATH at 150 hit on 7/15. All of the action since mid-July certainly resembles a Triangle pattern atop the May-July upleg from 121.68 to 150.
Probably the first price pattern both fundamental and technical investors learn to recognize is a Head and Shoulders Top. Rightly or wrongly, it is the Holy Grail of technical formations, striking fear into holders of the stock, index, ETF, or commodity that exhibits such a technical set up, while eliciting an opposite reaction from put owners and short sellers who anticipate huge gains captured by impending weakness.
Last Wednesday (July 14), with AAPL trading at 148.65 but off of its new all-time high at 150, Mike Paulenoff alerted MPTrader members to potentially consequential yellow caution flags emerging in his technical setup work.
Mike wrote:
This morning, JPM raised its Target Price to 175, one day after Citigroup raised its Target Price to 170. Do I hear 180... 185? Crickets at the moment. The Street is falling all over itself in its bullish view of AAPL.
