Friday, February 25, 2011

Home Depot About to Crumble

The Home Depot, Inc. (NYSE: HD) — This home improvement retailer rose from $30 to over $39 following our last buy recommendation in the Trade of the Day on Sept. 14. But the stock is now fundamentally overpriced, and commodity inflation could cut into future profits.

S&P cut their rating to “sell” from “hold,” because compared to their competition, the stock is “overpriced” with “weak growth prospects.”

Technically, HD flashed a Collins-Bollinger Reversal (CBR) sell signal (our proprietary internal indicator) on Tuesday. On the same day, the Moving Average Convergence/Divergence (MACD) registered a bear signal.

Traders should sell current short- and intermediate-term holdings or protect positions by writing options. Short sellers may want to consider HD for a decline to $32-$34.

Trade of the Day - HD Stock Chart

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