A challenging setup for Home Depot (HD)

Question: Can I get your thoughts on the HD chart? Thanks Steve

Home Depot (HD) has a challenging chart pattern in our view. Taking a step back and looking at the monthly chart reveals a big topping pattern for HD relative to the S&P 500 (SPX) that provides a major risk for the absolute price chart. In addition, HD broke below its 40-month moving average versus the SPX in February 2023 and has remained below that longer-term moving average ever since. The stock's absolute price higher high into late 2024 sets up a failed breakout and bearish divergence against its weaker chart relative to the SPX.

In our view, the setup for HD tilts bearish with risk below chart supports at 331-323 toward the 2023-2022 lows from 277 to 264 and potentially the March 2021 low near 246. It would take a rally back above the 13- and 26-month moving averages at 373-376 to suggest stability for HD.

Chart 1: Home Depot (HD) (top) and relative to the S&P 500 (bottom): Monthly chart