Home Depot (HD) and Lowe's (LOW) reported strong earnings last week, and both stocks surged over 8% on the news. A derivative play off the strength in the home improvement sector is Whirlpool (WHR) , the world's largest manufacturer of household appliances. The stock has had a tough year so far, but it is currently breaking out of a basing pattern and looks ready to run.
The weekly chart shows Whirlpool shares dropping over 30% from their high earlier this year but then attempting to hold an area of support defined by intersecting trend lines drawn off the 2014 highs and lows. A large bullish engulfing candle formed, encompassing the range of the last two weeks and testing the downtrend line drawn off the highs of this year.
Moving average convergence/divergence is making a bullish crossover, and the relative strength index has moved above its 21-period signal average. These are signs of positive price momentum on this longer term timeframe. Chaikin money flow has been negative for the last six months but is back above its 21-week average and centerline, reflecting early signs of improving money flow.
On the daily chart, the recent consolidation above the intersection of support lines can be seen as a rudimentary inverse head and shoulders pattern with neckline resistance in the $160 area. On Friday, the stock closed above both the pattern neckline and the 2015 downtrend line. Moving average convergence/divergence and the relative strength index have both crossed over their centerlines, and the money flow indicators have been positive on this timeframe since early October.
The inverse head and shoulders formation projects an initial price target measured by adding the height of the pattern to the neckline, which would take the stock back to the current level of the 200-day moving average.