HD Home Depot toppy and set up for a decline

882 4
Home Depot is at nose-bleed levels from my perspective.

The rally is nearly linear for over a year (note the tight regression and the 60% rise in price) and you can clearly see the bulls have had their party for a long time now.

It is astounding how HD has refused to go down along with the other homebuilding stocks and lumber prices and the financial engineering of repurchasing shares to keep investors gobbling up shares seems to have created "disregard" and a situation where there is much more risk to the downside than to the upside for HD .

Note how corrections have occurred once HD has gained 20%in 63-days time (one quarter of a year). The price is action is indicative of shareholder churning, likely from long term holders taking profits.

I view a 10% drop as more than 60% likely from my perspective. I have no position in the shares one way or the other, but will be considering my trade levels and options.

RISK = 3 average daily trading ranges (11 day average). REWARD = 5 average trading ranges or a break of 72 visible and obvious support.


Tim 3:57PM EST Monday, August 5, 2013
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I think this is a good time to take this trade off. VIX has popped up a fair amount. We have had a nice post-options-expiration selloff also. Earnings are also behind us and this is the most oversold the stock has been in over a year (using a 6-month rate of change as the measuring stick). I'll hope I don't miss out on the rest of the decline, but the risk-reward from this level is a bit skewed. There is a lot of risk to the stop loss and just a bit of potential return to the target. Let's step aside and re-visit on a rally. Cheers. Tim 11:58AM EST Aug 21, 2013 74.46 last :-)
Great trade so far.
This one is on my watchlist, i found it on a scan and it's in the weekly chart that i have a more bearish view, because volatility expanded and the divergence is there (as you point also). Let's see how it unfolds, but thanks to bring it here...
I think it's a nice call.
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