Home Depot Pushed Through Resistance on Guidance News

Published on Wednesday, 06 June 2012 16:34 Written by David Becker

Home Depot Inc., (NYSE: HD) surged higher along with the broader markets after the company announced higher return on capital.  The company revised its expectations and now expects operating margin of 12% and return on invested capital of 24% for fiscal year 2015. It anticipated reaching its prior goals for 10% and 15%, respectively, by the end of this year, about a year ahead of the schedule it set in late 2010. Home Depot also predicted repurchasing around $4 billion in shares this year, a $500 million increase.

Price action moved higher on heavy volume pushing through resistance near the 50-day moving average at 50.00.  The stock is poised to test the resent higher near $52.50.  The stock price is up more than 18% on the year, and has recently made a 52-week high.  The recent break of a downward sloping trend line created by the highs in early and late May, confirm the rebound.  Support on the stock is the 10-day moving average near $49.  A break of this level would likely see a test of the recent lows near $46.00.

Momentum on the stock has converged with the MACD spread crossing above and below the 9-day moving average of the spread multiple times in the last few trading sessions.  The index has been printing around the zero line, after bouncing from extreme negative momentum.

The upward movement of the RSI (relative strength index) confirms the rebound rally, and is currently printing near 55 which is the middle of the neutral zone.  Volume on the stock moved higher above the 50-day moving average of volume.