Entering Home Depot (HD)

We have received a new buy signal on Home Depot. As you recall we were stopped out of our previously successful position in HD in mid-August (post here). It has taken a couple months, but the stock has stabilized and has been able to signal a resumption of the prior uptrend.

Here is the Weekly view, of course. This is showing price breakout of the coiling triangle pattern, with increased volume this week and a confirmation from the Relative Strength trend that shows a breakout relative to the market as well.

This is what we hope happens when we exit a strong position; we want to see the price consolidate and slow down after such a rapid increase in value. We also like to see, regardless of our sell signal, that the underlying bid for the stock is strong enough to allow it to set again quickly. What we DON'T like to see after an exit signal is a sharp and brutal decline. That signals more trouble ahead and that there is something definitely wrong and out of balance. But a smooth, orderly correction or churning gives us a fantastic new base to launch our next position off of.

As of our entry today, we will use the prior low and horizontal support at $72 for our stop. That stop is about 10% away from the current price, which gives us a nice cushion to trade against. As this progresses higher we will be able to tighten up that stop a bit.