I’ll Buy HD On Tuesday If It Breaks This Level

Before the market opened I was aware of a number of stocks that were going to
open significantly higher. Agilent
(
A |
Quote |
Chart |
News |
PowerRating) opened at 30.50, a new 52-week
high, and immediately sold off a point down to 29.50. It was at this time that A
began appearing on my scanner as a sell through the day low. I was looking for a
gap fill to Friday’s high. Although a number of large sellers came into the
market, Agilent refused to sell through the support level around 29.40.

At this point I was aware that the various market indexes were now on the
positive side and beginning to gain strength so I covered my short and focused
on 29.80 as the reversal point to the upside. Once it cleared 29.80 I went long.
There was a large offer in the NYSE openbook at 30.00. I placed a buy stop just
above this point to add to my position. I later sold all the long position for a
profit. Once the initial move on Agilent took place Agilent once again proved to
me that the trend is your friend.

Home Depot
(
HD |
Quote |
Chart |
News |
PowerRating) and Lowe’s
(
L0W |
Quote |
Chart |
News |
PowerRating) were both indicating a
strong opening due to strong financial numbers and positive news posted by
Lowe’s. I quickly placed two level II screens side by side in anticipation of
the 2 stocks opening. During pre-market trading LOW’s and HD had both traded
significantly higher then where they opened on the NYSE. LOW opened at 65.75 and
HD opened at 41.95. I originally planned on being a buyer of either of the two
stocks but neither provided the enough confirmation or the right entry.

It wasn’t until HD started selling off and broke its opening price that I had
enough confirmation to go short HD. I later covered for a profit. I was unable
to get the short fill I was looking for in LOW as a huge seller prevented any
upticks during the down move.

Last Friday I told you to keep an eye out on GMT because it closed near its
52-week high on 6 times its average daily volume. GMT opened up .15 at 40.75 and
immediately sold off down to 40.30. It was not until late in the morning that
GMT came up on my alert as a day high as well as a 52-week high. At this point I
had enough confirmation to go long at 40.80 and added to the position at 41.00.
I later took profits when my trailing stop was hit.

Tomorrow morning Home Depot has a conference call at 9:00 am ET to discuss its
earnings. If HD has strong numbers I will be looking for it to trade up towards
its 52-week high of $44.00 and will definitely be long through this point of
resistance. If you are watching HD then you have to be watching LOW to break its
52-week high of 67.00.

Michael Kestler is a full-time professional trader and managing partner for
Evolution Capital LLC., a proprietary trading firm. Mr. Kestler specializes in
intraday trading of NYSE listed stocks.