Earnings Play: Lowe's

Key support level at 151.00.

Downtrend 2

On Wednesday, before market, Lowe's (LOW) is expected to report third quarter EPS of $2.00 compared to $1.41 last year on revenue of approximately $21.2 billion vs. $17.4 billion in the previous year. The company is the second-largest home improvement retailer in the U.S. and its expected move based on front-month options is 5.3%. The last time the company reported earnings the stock rose 0.2%.

Looking at a daily chart, in logarithmic scale, Lowe's stock price appears to be declining in a short-term downward channel that began to form after price made an all-time high of 180.67 on October 16th. The RSI is currently below 50 and showing unconfirmed bearish divergence. The 20-day simple moving average (SMA) just crossed below the 50-day SMA, a bearish signal. Price will likely breakout to the downside of the 151.00 support level that price has been holding above since early-August. If price breaks below 151.00, then its next target is the 134.00 support level. If price drops below 134.00 it would be a bearish signal, as price would likely have also crossed below its 200-day SMA. If price is not stopped at 134.00 it could drop as low as 123.00. On the other hand, if price gets above the upper trendline of the downward channel, it would be a bullish signal that could send price up towards its record high around 181.00. If price breaks above 181.00, then its first Fibonacci target would be 213.00.      

Source: GAIN Capital, TradingView

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