HD Watch

Home Depot Inc. (HD) has crept back into bull phase on the fast stochastic but remains within its range of the last six trading days. This is may be turning bullish, but for the shorter-term trader, it's a weak bull, staggering through the pasture in search of a mouthful of rotten straw.

	trend	sto	sto zone	pps	psar	macd	macd trend	ma20	ma200
HD $28.90

This stock appears in the portfolios of both Jim Cramer and Warren Buffet. This guys are long-term thinkers, and certainly the stock has shown a remarkable recovery from the recession low of $17.05 in October 2008, a dark month if ever one there were.

On its April 28, 2010 swing high, the stock had more than doubled.

So, what's not to like?

To begin with, the stock is trading below its 200-day moving average. I don't buy such stocks as growth plays, except in the occasional fit of madness. A stock that can't move above it's 200-day ma is leaky boat in which to ride to prosperity.

Secondly, the bull signals that have shown have produced fairly minor price rises. The stock is basically trading with range of a bit of $30 and a bit below $27, and has been since late June.

Moreover, since the April high, the stock has corrected sharply, setting a lower low. If the price fails to push above $37.03, then it will be in a downtrend.

So, to open a position, I would want to see at the least a push above the 200-day ma, and also a push above $31 a share, signifying a break out of the narrow range.

Cramer and Buffet may be absolutely right for the long haul, but that's not how I trade. Like almost everyone in the world, I've got money needs now.

On the fundamentals, as well, HD fails in several respects. The price-to-sales and current ratios are low, and debt to equity is a bit high. A 15% return on equity is lower than I like, and revenue is 14% below five years ago.

On the other hand, a 3.16% dividend yield is nothing to sneeze at.

On the Person's chart, the stock is trading below the upper weekly pivot.

Person's Table

	pps	pps open	upper pivot	lower pivot
HD $28.90		$28.08 sep1	$29.96 +23.7%	$29.34 -1.5%

Reversal Levels

• $30.53, +5.6% (200-day ma)
• $30.32, +4.9% (swing high)
• $28.90 <== You are here.
• $28.39, -1.8% (20-day ma)
• $27.55, -4.7% (swing low)

Disclaimer

Tim Bovee, Private Trader tracks the trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment. No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

Abbreviations:

• pps - Person's Proprietary Signal.
• psar - Parabolic Stop and Reverse
• ma20 - 20-day moving average
• ma200 - 200-day moving average
• macd - Moving Average Convergence-Divergence
• sto - Fast Stochastic

About the glance: The colors indicate the state of each signal.

• trend: Determined by the 5-day moving average, green for up, red for down, yellow for sideways.
• sto: green for bull, red for bear.
• sto zone: green for overbought (80+), red for oversold (20-), yellow for neutral zone
• psar, pps, macd: green for bull mode, red for bear.
• macd trend: green for rising, yellow for sideways, red for falling.
neutral.
• ma20, ma200: green for above the average by more than 1%, red for below the average by more than 1%, yellow for within 1% either side of the average.