HD dominated by bears dragging the market lower throughout the day
Home Depot Inc. (HD) Technical Analysis Report for Sep 16, 2020 | by Techniquant Editorial Team
HD finished Wednesday at 281.63 losing $3.95 (-1.38%), notably underperforming the Dow Indu. (0.13%). The bears were in full control today, moving the market lower throughout the whole session. Closing below Tuesday's low at 282.38, the stock confirmed its breakout through the previous session low after trading up to $1.70 below it intraday.
Daily Candlestick Chart (HD as at Sep 16, 2020):
Wednesday's trading range has been $5.90 (2.07%), that's slightly below the last trading month's daily average range of $6.14. Things look different on the weekly timeframe, where the market's trading range of the last week has been slightly above the market's average weekly trading range. The longer-term, monthly volatility is currently slightly higher than usual for HD.
Even with a strong opening Home Depot closed below the prior day's open and close, forming a bearish Engulfing Candle. The last time this candlestick pattern showed up on September 3rd, HD lost -1.81% on the following trading day. Additionally, one bearish candlestick pattern matches today's price action, the Black Candle.
After trading as low as 280.68 during the day, the market found support at the 20-day moving average at 281.61. Prices broke below the key technical support level at 282.97 (now R1), which is likely to act as resistance going forward. After having been unable to move above 286.70 in the previous session, the share ran into sellers again around the same price level today, failing to move higher than 286.58.
While HD is currently in a short-term downtrend, this might just be a correction, as both the medium and long-term trends are still bullish.
Buying could speed up should prices move above the close-by swing high at 286.70 where further buy stops might get triggered. With prices trading close to this year's high at 292.95, upside momentum could accelerate should the stock be able to break out to new highs for the year. As prices are trading close to September's high at 288.04, upside momentum might speed up should Home Depot mark new highs for the month.
Among the 10 market conditions that our pattern recognition engine identified today, the statistics for the Support/Resistance based market condition "Bullish Bounce off SMA 20" stand out. Its common bullish interpretation has been confirmed for Home Depot. Out of 53 times, HD closed higher 60.38% of the time on the next trading day after the market condition occurred. The optimal exit for swing trading this condition on the long side has been after 10 trading days, showing a win rate of 62.26% with an average market move of 0.81%.