The Home Depot, Inc. owns and operates 1,101 do-it-yourself warehouse retail stores offering building materials, home improvement products and related furnishings. For the fiscal year ended 1/28/01, net sales rose 19% to $45.74B. Net income rose 11% to $2.58B. Revenues reflect the opening of 204 new stores and increasedcomparable store sales. Earnings were partially offset by an increase in selling and store operating expenses.

May 8, 2001

One area of the economy that has been mostly impervious to the well publicized slowdown has been home building and general home improvement. Just ask anybody you know who is involved in home construction and they will tell you that they have a huge backlog of business. This trend clearly helps Home Depot, the nation's third largest retailer and unquestioned leader of the home improvement supply trade. Also helping Home Depot is the fact that lumber prices are starting to rise again. Rising lumber prices should help Home Depot to show greater than previously expected profits. Speaking of profits, Home Depot is scheduled to report its earnings one week from today before the market opens. Therefore, HD may be on the verge of an earnings expectation run. It might be prudent to wait for HD to trade above today's high of $50.15 before initiating a position. If HD gaps up $1.50 or more on the open, one might want to wait for a subsequent pullback before going long. HD is currently enjoying a very strong MACD that is rising nicely and is pointing towards more gains. Money Flow has also been recently outstanding. Initial support, in the event of a pullback, should probably be found at $48.25, which is right on a rising trendline.

Picked on May 8th @ $50.01
Change since picked +0.00
Stop Loss $45.88

May 10, 2001

Home Depot was able to rally today following a report from the Bank of Tokyo-Mitsubishi that retail sails for April were stronger than expected. The surprisingly strong numbers suggest that good weather inspired consumers do a little extra shopping. This good news follows reports earlier this week that lumber prices are ratcheting up, which should also help Home Depot's bottom line. All of this bullish news is coming just in time to get traders believing that HD will be able to beat consensus earnings estimates of $0.25 when the company reports its quarterly results on May 15th before the market opens. A nice earnings anticipation run could start in earnest tomorrow if HD can trade above $50.25 accompanied by first hour trading volume exceeding 2,000,000 shares. One may want to be patient about jumping on board if HD gaps up $1.50 or more on the open because a bit of a pullback may offer traders a better entry price. It is important to note that the RSI is telling us that HD has a fair amount of rally room before this indicator suggests an overbought condition.

Picked on May 8th @ $50.01
Change since picked -0.76
Stop Loss $45.88