Shares of Home Depot Inc (HD) fell sharply today as money ran from high valuation names. Investors do not usually think of Home Depot as a high valuation name, but prior to today’s drop, the retailer was trading near a 30 P/E. That is out of control and ridiculous. The sell signal came in strong yesterday with a daily topping tail. Topping tails occur when a stock surges to new highs in early trading, then reversals hard to close near the lows. This creates a long tail at the top. It is extremely bearish. Home Depot put in this topping tail yesterday.
In terms of a price target on the downside, investors and swing traders can look to the previous resistance, prior to the breakout recently that sent the stock to current highs. The previous level as at $293.00. Once there, Home Depot likely becomes a buy again, for a bounce higher.