timwest
Short

Home Depot (HD) hasn't rebounded from oversold

BATS:HD   HOME DEPOT INC
328 0 5
HD             only bounced briefly to 76 earlier this week and I posted on the previous HD             chart that I would sell a gap over 76 or 77-78, HD             didn't reach my levels. I am willing to get back in on the short side here with a target of 70-68 as labeled on the chart.

The home building stocks have continued lower and HD             failed to rally despite raising guidance and beating their earnings estimate. By the way, they serially raise guidance. The fact of the matter is that HD             is a cyclical stock and management really can't forecast accurately so they forecast conservatively. In each of the past two recessions, HD             fell to 10 times earnings and earnings are forecasted to go from $3.60 this year to $4.25 next year. When growth gets hot, it can rally to 20 times earnings and you can see it made it pretty close to 20 times the $4.25 estimate (source: Value Line).

Stop loss 79-80. Target 70-68. Last 74.59

Tim 10:36AM EST, August 30, 2013
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