Home Depot was downgraded today. At the time of typing this blog post, HD was down about 1.5%. Is this a good shorting opportunity?
Guggenheim Securities downgraded HD from ‘buy’ to ‘neutral’, because they see a “ramp-up” in spending that will hurt earnings next year. Looking at the 4 hour chart, this may get a little bit uglier for HD.
Notice the ascending channel that started way back in December of 2018? Right now, HD is already at the resistance of that channel, and this downgrade could be the catalyst that sends it back down to the support of the channel. In addition to being at channel resistance, HD is also signaling overbought on the RSI.
Another fundamental “thing” about Home Depot is its ability to predict economic conditions. However, they would show a loss in revenue over multiple quarters if that was the case, and it’s not in this situation. Home Depot, Walmart, auto manufactures, etc., can be used to predict where the economy is at any given moment.
Either way, I opened a short position this morning at market open by purchasing put options. I will keep a close eye on them, and I do not plan on holding them for long, because I do not think HD will hurt too badly from this. They seem to be a solid company that can weather this little storm.