Home Depot (HD) shares pulled back sharply in the weeks following their January high. Then they began moving steadily lower in a declining channel-like pattern. Now they are approaching an inflection point that could be resolved by a volatile move.
They have returned to their 40 week (approximate 200 day) moving average and an 18 month uptrend support line on the weekly chart. Price momentum is obviously to the downside but money flow, as represented by the weekly Chaikin money flow reading, is still reflecting positive buying interest.
The drop in February was followed by a continued but more measured decline with the stock making a series of lower high and lower lows. The trajectory of the pattern has flattened out as the stock price has approached its 200 day moving average, and the $170 level looks to be supplying support.
Home Depot shares are being compressed within the the triangle downtrend line resistance and support in the $170 area. This level of price compression and low volatility is usually resolved by a high volatility move.
Unfortunately, even if the volatility scenario plays out, the direction the move will take is unclear.