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Home Depot's Must-Know Chart Levels After Earnings Beat

Home Depot is rallying after better-than-expected earnings. Here are the must-know levels for the stock on the upside and downside.

With another tough session in the stock market, Home Depot  (HD) - Get Free Report is a beacon of hope for bulls, up about 1.5% on the day.

The rally comes after fourth-quarter earnings of $2.28 a share beat expectations by 17 cents. Revenue of $25.78 billion sank 2.7% year over year and was in-line with expectations, although comp-store sales growth of 5.2% topped estimates of 4.8%.

Surprisingly though, management’s full-year guidance for both revenue and earnings came up a bit short of consensus expectations.

In a tape like this, it would seem that investors are willing to sell anything and the fact that they’re not selling Home Depot after an in-line revenue result and guidance that missed expectations catches my attention. It also seems to have caught the attention of the Real Money team, which picked Home Depot as its Stock of the Day.

Let’s look at the charts to see what’s going on.

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Trading Home Depot Stock

Daily chart of Home Depot stock. 

Daily chart of Home Depot stock. 

The chart for Home Depot actually look really healthy. The stock continues to trend to new highs, is holding up above its key moving averages and has bullish trends. Now it just needs to break out over resistance near $247. Can it do so on this earnings report?

If the broader market can bottom and begin to rally - going from a headwind to a tailwind for the bulls - then it may be enough to send Home Depot stock higher. However, if the selling persists, it’s hard to imagine this report and outlook being strong enough to bolster Home Depot stock.

But until the charts confirm one way or the other, we must only think about these potentials and be careful not to form a bias. 

Monday’s pullback found support at the 20-day moving average and just above the previous breakout spot near $237. This is the first level to watch on the downside should Home Depot begin to pull back.

Below that, two important trend areas come into play. First, there’s short-term uptrend support (blue line) and the 50-day moving average. This trend has began in December and has helped buoy temporarily declines in Home Depot stock. The second is long-term uptrend support (purple line) and the 200-day moving average. Below both of these levels and Home Depot will be in no man’s land for the time being.

While shares are up in Tuesday’s action, they are not up decisively and they are not breaking out over $247. If HD can clear $247, then $250-plus is on the table and bulls will be firmly in control. Otherwise, let’s keep an eye on some of the downside levels from here.