For Lowe’s, the company earned $1.98 a share, missing estimates by a penny. Revenue of $22.3 billion flew high by 28.3% year over year and cruised past expectations by more than $1 billion.
Compable-stores sales were robust as well, climbing 30.1% vs. expectations of 22.8%.
Finally, fourth-quarter revenue and comp-store sales guidance came in well ahead of estimates, while the midpoint of management’s earnings guidance was about in-line with consensus expectations at $1.17 a share.
Some are wondering why the stock was trading notably lower than when Home Depot reported earnings.
My observation would be that Home Depot stock was up about 100% coming into its report, whereas Lowe’s stock was up about 170%.
Further, I find it discouraging to see a stock trade lower on what is ultimately pretty good news.
While some investors view this dip as a buying opportunity - and with a long enough time horizon, it is - I view the price action as a concerning development in the short term.
A look at the chart shows Lowe’s stock breaking out over resistance in early October. That was when shares cleared $170 resistance from August and September.
Shares traded up to $180, but the stock was rejected from this level in four consecutive sessions. Then $170 failed as support on the pullback and again acted as resistance in November. The failure in November allowed a lower high to form, and with it, a downward channel (blue lines).
Now the stock is in a precarious position. Struggling to hold the $150 area, shares are trading down into channel support.
Should Lowe’s stock hold this area, look for a rebound back above $152, putting the 100-day moving average back in play. If it can do that, it's followed by the 50-day moving average and channel resistance.
This potentially low-risk dip comes after a decent pullback on solid quarterly results. If investors prefer to wait, that’s fine too.
If channel support fails, short-term dip-buyers will know it’s time to bail. A loss of this level could create an issue, because there’s not a lot of significance between $145 and $133 — with the exception of the 10-month moving average near $140. Near $133, the rising 200-day moving average comes into play.
In short, let’s see if channel support holds. If so, Lowe’s has a clear although potentially tough road higher in the short term. If it fails, we could see some more selling pressure before Lowe’s finds its footing.