First up is Home Depot (HD), the home improvement retailer that's likely to see a run on generator deals on Black Friday, just a couple weeks after Sandy hit the East Coast. But I digress.
Right now, Home Depot is forming a textbook version of the ascending triangle pattern, a setup that's formed by a horizontal resistance level above shares and uptrending support below them. As shares of HD have bounced in between those two price levels, they've been getting squeezed closer and closer to a breakout above that $63.50 resistance level. When that breakout happens, investors have a buy signal for this stock.
The 50-day moving average has acted like a solid proxy for support over the last several months -- that makes it a logical place to put a stop loss on this trade. Remember, it's important not to be early on this trade; resistance at $63.50 has turned away shares the last three times they tried to overcome that price, so it's crucial to see resistance get taken out before jumping in.
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