Shares of Home Depot (HD) - Get Report are once again under pressure. The stock is off over 1.5% in the early going after opening the session with an ugly downside gap. This breakdown type action extends Home Depot's drop from last week's high to 3%. New September lows appear to be on the way, followed by a retest of major support.
Home Depot left behind a very ominous-looking top back in late July and early August. After the powerful surge off the Brexit low, Home Depot failed numerous attempts to extend this rally leg into new 2016 high territory.
By early September, it was becoming clear that the stock was in trouble and a deep pullback was on the way. Home Depot was unable to hold key support during the initial phase, and by early last week, shares had fallen nearly 10% from the August high. The stock managed to stabilize since then, but as the stock finished last week on a very weak note, a new leg lower may have begun.
At midday, Home Depot is still above its September low of $125.43. If this level is taken out, more downside is likely. Just below, between $124 and $123, is a very solid support zone.
This area held the March low and managed to withstand the Brexit selling wave in June. Patient Home Depot bulls should keep a close eye on this zone. A base here could develop into a low-risk entry opportunity for the A+-rated stock.
Meanwhile, Ken Goldberg of Real Money Pro, TheStreet's subscription-based premium site for active traders and professional investors, believes charts show that Toll Brothers (TOL) - Get Report might have also peaked -- a bad technical sign for U.S. housing in general. Click here for a free 14-day Real Money Pro trial to check out Goldberg's analysis.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.