New Plays, Tuesday, 07/12/2005
HAVING TROUBLE PRINTING?
New Long Plays
Home Depot - HD - close: 41.30 chg: +1.00 stop: 38.75
Founded in 1978, The Home Depot is the world's largest home improvement
specialty retailer and the second largest retailer in the United States, with
fiscal 2004 sales of $73.1 billion. The company employs approximately 325,000
associates and has 1,925 stores in 50 states, the District of Columbia, Puerto
Rico, 10 Canadian provinces
and Mexico. The company recently announced the
creation of a business development operation for retail expansion into China.
The Home Depot has been recognized by Fortune as the No. 1 Most Admired
Specialty Retailer for 2005. (source: company press release or website)
Why We Like It:
It was a strong day for Home Depot (HD). The stock out performed the broader
market and added 2.48 percent on above average volume after the stock received
an upgrade to a "buy"
rating. Shares were already on the upswing with a
relatively fresh MACD buy signal and a breakout over the $40 level and technical
resistance at its simple 200-dma. Today's pop higher put it above resistance in
the $40.50-41.00 region and it broke through its trendline of lower highs dating
back to the November peak (see chart). The Point & Figure chart is also bullish
with a $63.00 price target. We are surprised this home improvement retailer
hasn't shown more strength recently.
The weatherman is forecasting a very strong
hurricane season this year and that always drives more traffic to Home Depot and
rival Lowes (LOW) in the South and on the East coast. Here's our plan. While we
wouldn't mind buying HD here at $41.30 we're going to try and catch a dip. We
are suggesting readers wait for a pull back. Our suggested entry point will be a
dip into the $40.85-40.50 range. One risk is that HD doesn't pull back and gets
away from us. That's okay. The other
risk is that HD pulls back and just keeps
on declining. That could happen if the broader indices stumble. We're going to
stick our stop loss under the simple 50-dma. Our target is the $43.95-44.25
range. We plan to exit before HD's mid-August earnings report.
Picked on July xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Date 08/16/05 (unconfirmed)
Average Daily Volume: 7.4 million
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