Editors Note:

I added Micron after their outstanding earnings. We were looking for a dip to $28.75 and that came on Monday when the Semiconductor Index fell sharply. Home Depot is moving sideways but still a target.


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HD - Home Depot - Company Description

The Home Depot, Inc. operates as a home improvement retailer. It operates The Home Depot stores that sell various building materials, home improvement products, and lawn and garden products, as well as provide installation, home maintenance, and professional service programs to do-it-yourself, do-it-for-me (DIFM), and professional customers. The company offers installation programs that include flooring, cabinets, countertops, water heaters, and sheds; and professional installation in various categories sold through its in-home sales programs, such as roofing, siding, windows, cabinet refacing, furnaces, and central air systems, as well as acts as a contractor to provide installation services to its DIFM customers through third-party installers. It primarily serves home owners; and professional renovators/remodelers, general contractors, handymen, property managers, building service contractors, and specialty tradesmen, such as installers. The company also sells its products through online. It operates through approximately 2,278 stores, including 1,977 in the United States, including the Commonwealth of Puerto Rico, and the territories of the U.S. Virgin Islands and Guam; 182 in Canada; and 119 in Mexico.

Shares were crushed last week on profit taking and the Amazon acquisition of Whole Foods. Analysts are seeing Amazon under every bed and around every corner. Fortunately, HD is almost Amazon proof. They are getting killed on a knee jerk reaction to Amazon's new endeavors.

The CEO was on CNBC last week and he said strong home sales and rising home prices were a boon for Home Depot. People are either improving their homes so they can sell them or remodeling because it is too expensive to move. Either way it benefits HD. Shares imploded on Friday with a $4 drop and there was no news. They hit a new high with the Dow on Monday at $159 and closed Friday at $151.

Eventually this mindless dumping will come to an end. Ideally we would like to be in HD with an entry point around $146. However, other traders will see this potential support and probably try to enter early so we will do the same thing.

With a HD trade at $147.25

Buy Jan $150 call, estimated price $6.35
Sell short Jan $165 call, estimated price $2.00.
Estimated net debit $4.35.