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Home Depot and Lowe's Report This Week - Here Are the Trades

Home Depot reports Tuesday and Lowe's Wednesday. Both stocks have been red hot. Here's how to trade them.

This is a busy week for retail, with DIY specialists Home Depot  (HD) - Get Home Depot, Inc. (HD) Report reporting earnings on Tuesday morning and Lowe’s  (LOW) - Get Lowe's Companies, Inc. (LOW) Report reporting Wednesday morning.

Neither company will be alone, though. Lowe’s will report along with Target  (TGT) - Get Target Corporation Report and TJX (TJX) - Get TJX Companies Inc Report in the morning.

Home Depot will report on the same morning as Walmart  (WMT) - Get Walmart Inc. Report, which is hitting new highs ahead of the print.

Demand for home improvement has been robust this year. While covid-19 threw a curve at Home Depot and Lowe’s, consumers for months now have been busy renovating and landscaping their homes. Construction trends have been strong as well.

Let’s check out the charts on these two ahead of earnings.

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Trading Home Depot Stock

Daily chart of Home Depot stock.

Daily chart of Home Depot stock.

It doesn’t take much analysis to get a sense that these companies have seen strong demand in recent months.

Since lifting off over the 123.6% extension near $270, Home Depot shares have stepped on the gas pedal. Heading into the report, however, the shares are overbought, and as a result, it’s tough to buy ahead of the news. 

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That’s particularly true with the stock having a bit more than doubled from the March lows.

If it continues higher, see if the Atlanta company's stock can clear $300. If so, it puts the 161.8% extension in play near $309.

On the downside, it wouldn’t be the least bit unhealthy to see a mild pullback in this one. 

Specifically, a decline to the $270 breakout zone and 20-day moving average would be reasonable — and potentially present a buying opportunity for investors.

Trading Lowe’s Stock

Daily chart of Lowe's stock.

Daily chart of Lowe's stock.

Lowe’s stock looks similar to Home Depot's, only that LOW shares have been in an overbought condition for longer (shown via the blue circle on both charts) and have rallied an impressive 167% from the lows.

This one has been tightening a rising wedge formation. On an upside breakout, look for a possible run to the 161.8% extension near $166. On the downside, a break to $150 likely puts the 50-day moving average on the table near $140.

Both names are hitting highs ahead of the prints. One difference here, though, is that Lowe’s stock may move in sympathy depending on the type of action we get in Home Depot, which reports a day before Lowe’s.

One thing I would be on watch for is a bullish reaction — potentially up to the 161.8% extension — followed by a fade from those highs. 

That may indicate a temporary top is in place for these two, as investors look to work off the overbought conditions.