How to Trade Lowe's With Earnings On Deck

Lowe's almost has doubled from its March lows. However, it hasn't made new highs yet.

Even though Home Depot  (HD) - Get Report is down on Tuesday after reporting earnings, that’s not stopping Lowe’s  (LOW) - Get Report from rallying 0.8% on the day. That’s even as the latter prepares to release earnings on Wednesday before the open.

Home Depot turned in a somewhat mixed quarter, which is leading to the stock's retreat. However, investors should realize that the stock tagged new all-time highs ahead of the print so anything short of a lights-out result would send Home Depot lower.

Home Depot shares were up about 75% heading into the print, and while Lowe’s has risen almost 100% from the March lows it has yet to hit new highs.

That leaves bulls with some room to run should shares react bullishly to Wednesday’s earnings report. Of course, after such a strong rally there are downside levels to be aware of in the event that shares dip after earnings.

Let’s take a closer look at Lowe’s with earnings on deck.

Trading Lowe’s

Daily chart of Lowe's stock.

Daily chart of Lowe's stock.

Lowe’s will report with Target  (TGT) - Get Report stock in the morning, which we took a closer look at this morning as well. In fact, these two have similar-looking charts, although Lowe’s has rallied much harder than Target in terms of percentages.

In any regard, Lowe’s stock has been trading incredibly well these past few months. That action can — perhaps surprisingly — continue regardless of whether we get an extension or a pullback after earnings.

The relative strength index at the top of the chart shows that Lowe’s stock is flirting with an overbought condition, but still has room to run higher. Conversely, a pullback will allow this measure to unwind a bit, potentially giving bulls room to run — that is, provided support holds up.

Bulls looking to buy the dip should keep a close eye on the $108 to $110 area. There it will find a key breakout level, as well as the 20-day and 200-day moving averages. Below could put $100 in play.

On the upside, keep an eye on $125, which was prior 2020 resistance. A close over this mark could kickstart a breakout in Lowe’s stock, with bulls looking at $141.42 as a possible longer-term upside target. There Lowe’s will find its 123.6% extension for the current 2020 range.