Will Lowe's Provide a Chance to Buy the Dip After Earnings?

Home Depot gave investors the dip-buying opportunity they were looking for after its earnings report. Will Lowe's do the same thing when it reports?
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As the pandemic was unfolding, shares of Lowe’s  (LOW) - Get Report and Home Depot  (HD) - Get Report began flying.

In some instances, these stocks looked more like tech stocks than home-improvement retailers. Over the past few months, however, the two have been trading sideways, absorbing the large gains from a few quarters ago.

On Tuesday before the open, Home Depot beat earnings expectations but withheld guidance for 2021. With the market throwing a tantrum near the open, it probably wouldn’t have mattered what the company reported.

In fact, it gave us the ideal buying opportunity that was mapped out on Monday.

Will Lowe’s do the same thing when it reports on Wednesday before the open?

Both companies are excellent operators, although Lowe’s has strongly outperformed Home Depot over most time frames in the past 12 months and beyond. 

Let’s look at the chart to see if an opportunity might arise, as one did with Home Depot this morning.

Trading Lowe’s Stock

Daily chart of Lowe's stock.

Daily chart of Lowe's stock.

Lowe's shares are down about 5.5% over the past two days, and at Tuesday’s low the shares were off about 7%. From this month’s high, the loss inches up to 8%. Not great, but also nothing to sound the alarm bells over.

Lowe’s hasn’t really been trading in a channel, but it is flat over the past six months.

The stock has been climbing along uptrend support since November, most recently testing and temporarily breaking this mark on Tuesday. But its 50-day and 100-day moving averages and VWAP measure helped support Lowe’s on the day as the shares are now bouncing.

With the shares dipping down into support ahead of the earnings report, I would like to see a higher reaction after the print. Obviously, that will depend on the quality of the report.

If the reaction is higher, then I first want to see Lowe’s stock reclaim its 10-day and 21-day moving averages.

Above that zone and $180 resistance is in play. This level has been notable resistance on two occasions, first in October and then again this month. To clear it would be significant, potentially putting the two-times range extension in play near $193, followed by $200.

On a bearish reaction, keep an eye on this month’s low near $162. Below could put the 200-day moving average in play, as well as fill the gap from December at $153.

Absent a horrendous quarterly report, this would be an ideal dip-buying opportunity like we saw with Home Depot this morning.