NEW YORK (Real Money) -- Retail has been all over the place, but my feeling is it has been much more negative than positive. We're seeing some of that negativity spill over into Home Depot (HD) despite some pretty good results. The stock has slipped into the red as I type this, although just by a handful of loose change.
While the stock has made a steady move higher from last September through February, bulls have taken a bit of a break from the buying. After the dust settles today, though, the charts seem to be hinting that we could see the buyers come back into play; however, we can't drift too much lower from here.
Home Depot has already broken out higher on the daily report into the number. Over the last 10 days, we've witnessed the eight-day simple moving average push over the 21-day SMA, while the slower MACD, medium-term 13 period RSI and longer-term 21 period RSI have all crossed in bullish fashion. The two RSIs have been a big key. The 13 period RSI has been a yellow flag for bulls any time it is under 50, while the 20 period RSI (top indicator on the chart) has been a huge red flag while under 50. We've erased both those conditions, which had HD teetering on the edge to begin May.
Combine these with the wedge breakout higher and HD should have a good opportunity to run into the $120s through the summer. There is support that looks to be converging around $111. I absolutely don't want to see the price breach that area by more than a dollar. As a high-dollar stock, I will give a little wiggle room here and not tie myself right to $111, but I'm not giving too much more room on the long side to maintain a bullish stance.
The weekly view isn't quite as bullish, but still has potential. HD is sitting in a descending triangle, with today being the first failed attempted at breaking above resistance. Again, we see that $110 area as important support reaffirming the bullish thesis from the daily chart in terms of being "right or wrong."
Still, there is a bit left to be desired here. First, the vortex indicator is hitting the same resistance as price, so a bullish cross there, even in front of price, would be a plus. I do like that we are seeing the 13 period RSI maintain a level well above 50. On the last solid bullish cross on the vortex indicator, we did see the RSI over 50, but we also saw the MACD recently cross bullishly. Currently, we have that same MACD buried deep in bearish territory. Part of that stems from the consolidation pattern of the descending triangle, but this needs to continue moving higher over the next few weeks or we should be testing $110 and I'd be a nervous bull if that situation set up.
For now, my view is bullish, but I want to let the day, and maybe even the remainder of the week, play out before taking a long call spread or short put spread position on this name. I really do believe we move higher, but I don't see anything wrong with waiting for a close over $115 or $115.25 before taking a position.
Editor's Note: This article was originally published at 11:27 a.m. EDT on Real Money on May 19.