A bullish and bearish trade on Home Depot (HD). What’s the difference? Satellite or Microscope? (May 14, 2014)

Discussed in this article: Home Depot Inc. ( $HD )

I want to look at Home Depot ( NYSE:HD ) today. The reason is because this is like two trades, you know, multiple trades in one stock depending on your time frame. Okay we’re on the daily chart, if we’re just kind of looking at it in this time frame, well, then the buy points are down here when it hits like 75.00, 76.00, you’ve seen them here, and then you just hang on to the stock. This is like channel trading for non-technical analysts; buy the stock here, you see it, you sell it when it gets above 80.00, 82.00.

You say, “Well that’s not much.” Well au contraire mon frère, you buy a stock at 76.00, you sell it at $80.00, you do it again, and again, and again, that adds up, and this is the way this stock has been trading. So what do you do now? Nothing, wait for the stock to come down here, once it bounces then you go ahead and do that trade again, just make sure you keep a tight stop here, and then again, by the way. So you go ahead, you buy the stock down here, don’t sell it when it gets day to 84.00, you don’t own it then, you’re going to be selling it when he gets to 80.00, maybe a little bit above that, but that’s the trade.

So why am I so intent on looking at this downside here and keeping a stop? This is why, because when you look at this in a longer view, like a satellite view, what we see is one of two things that’s currently unknown; we see a very long consolidation that leads to upside or we see a very long complex top that leads to the downside, we don’t know that. So if you’re short-term trader there’s your trade. If you’re a long-term trader you don’t want to be owning Home Depot ( NYSE:HD ) right now, you don’t, because it’s drifting sideways, it’s not making you any money. I guarantee you you’ll be able to buy this stock at the same price or lower, 76.31, at some point over the next month or so.

What I’m saying is, this is drifty, it’s sideways, it’s up and down; look at the way this is interacting with the 200-day moving average, it’s above it, now it starts to get below it here this one time, and then finally it’s kind of below it a lot, it’s starting to get more so. So this looks like it could be a top here, and so we just have to wait and see. Long-term investors, don’t own Home Depot ( NYSE:HD ), there’s no reason to, unless you want to get the 2.4 dividend yield, which is fine, you can do that, but just wait. If you’re a short-term trader do those channels, because the channels work.

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