Sell Home Depot for a chance to buy lower or after a break above $300

After enjoying stellar gains in 2021, Home Depot, Inc. (NYSE:HD) lost it all again this year. The stock has underperformed the S&P 500 index. YTD returns for the home improvement retailer stands at minus 27%, worse than a return of minus 16% of S&P.

Policy tightening by the Federal Reserve and growing squeezes on income has weighed heavily on HD. As the market waits for the quarterly results on May 17, analysts expect an EPS of $3.66. The earnings are lower than the $3.86 reported in the comparable quarter of 2021. The lower expectation reflects sector weaknesses amid ongoing supply chain issues.

As consumers cut back discretionary spending, investors are currently shifting from sector stocks. However, Home Depot ranks strong on dividends. In its last earnings report, the retailer hiked its quarterly dividend to $1.90 per share. The dividend yield remains at 2.3%, more than 1.37% for S&P 500. Evidently, Home Depot is a recommendable option for long-term focused investors. But should you buy it now?

Home Depot faces resistance at $300

Technically, Home Depot’s established resistance is at $300. The stock retreated slightly after approaching the level. We expect the stock to retreat ahead of the quarter earnings, potentially to the latest $280 bottom. A bull case scenario for the stock will build if the stock closes above $300. Earnings beat and outlook will strengthen the bull case.

Summary

Home Depot stock faces resistance at $300. The stock could retrace down ahead of earnings. Investors should sell now and buy lower if earnings come strong. A break above $300 will also set Home Depot for a fresh bullish run.