Trading Home Improvement Giants Home Depot, Lowe’s Before Earnings
NEW YORK (TheStreet) -- Unusual weather in the U.S. in 2014 has increased spending for home repairs. There are two giants in this segment of the retail-wholesale sector, and they report quarterly earnings Tuesday and Wednesday.
Dow Jones Industrial Average component Home Depot
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Home Depot is the larger of the two companies with 365,000 employees and 2,263 store locations, most of which are in the U.S. It has a market cap of $114.5 billion, a price-to-earnings ratio of 20 based on 12-month trailing earnings and a dividend yield of 2.3%.
Lowe's has 167,000 employees and 1,836 store locations, most of them in the U.S. The company has a market cap of $50.9 billion, a 12-month trailing P/E of 21 and a dividend yield of 1.8%.
Both stocks lag the S&P 500, which has a gain of 5.8% year to date.
Where I live in Pasco County, Fla., the nearest Home Depot or Lowe's is 10 to15 miles away. That will soon change as Lowe's is building a new store five miles away on State Road 54, just off Highway 41.
Let's compare the weekly charts of the two home improvement companies.
Courtesy of MetaStock Xenith
Home Depot ($83.69) has a positive weekly chart with its five-week modified moving average at $81.20. The huge rally for the stock began with a test of its 200-week simple moving average when it was $28.79 two years ago. I consider the 200-week SMA as the long-term "reversion to the mean," which is now $57.72.
Investors looking to buy Home Depot stock should consider entering good-'til-canceled limit orders to buy weakness to semiannual and monthly value levels at $80.84 and $80.29, respectively.
Investors looking to book profits should consider entering good-'til-canceled limit orders to sell strength to semiannual and quarterly risky levels at $93.55 and $95.40, respectively.