Lowe’s Giant Turnaround Could Soon Fizzle Out

The last six months have seen a massive turnaround for home improvement giant Lowe’s (LOW).

Back in October, it was stuck in a downtrend and struggling to stay above $180. That was its lowest level in 12 months.

Fast forward to a week-and-a-half ago, though, and LOW was trading within a dollar of its December 2021 all-time high ($263.31).

That 44% rally came off the back of rate cut expectations.

But Fed Chair Jay Powell stated last Friday that the Fed is in no rush to start cutting rates. So let’s see where LOW could be headed from here…

Tracking Toward Support

After rallying to its mid-July peak, LOW made a lower high in September and developed into a downtrend:

Lowe’s (LOW)

Source: eSignal

That downtrend coincided with the Relative Strength Index (RSI) falling through support (green line) into the lower half of its range. That showed buying momentum was declining.

The 10-day Moving Average (MA, red line) confirmed the down move by crossing beneath the 50-day MA (blue line). Both MAs then moved lower.

Also, notice the action of the MACD…

The blue MACD line initially rallied above the zero (0.00) line. But it then reversed and bearishly crossed beneath the orange Signal line. They too became stuck in their lower range.

That down move lasted through October, when LOW’s current rally began.

As the chart shows, LOW’s rally followed two bullish technical signals:

1. The RSI rallied from oversold territory and broke up through resistance.

2. The MACD line crossed above the Signal line with both rallying up through the zero line.

LOW retraced from mid-December when the RSI bearishly formed an inverse ‘V.’ But its rally resumed in February with the RSI regaining traction in its upper band.

You can gauge the strength of that rally by the rate at which the 10-day MA accelerated above the 50-day MA. (And it has been steadily tracking higher.)

But LOW peaked on March 22 when the RSI again reversed from overbought territory in a repeat of its December pattern.

Since then, the RSI has been tracking back down toward support (red circle), pulling LOW down with it.

Take another look:

Lowe’s (LOW)

Source: eSignal

So what should we look for next?

A Cross Beneath the Signal Line

The RSI is tracking lower and could soon retest support. What happens here will be key…

If the RSI breaks into the bottom half of its range, that could pull LOW lower too. That would potentially set it up to test the $240 level.

Yet I’ll also be watching the MACD for extra confirmation of LOW’s next potential move.

As the chart shows, the MACD line has recently crossed beneath the Signal line. And the latter recently flattened out.

For LOW’s recent down move to develop further, the MACD will need to keep tracking lower, pulling the Signal line lower too.

For now, we’ll keep monitoring these factors closely to see how things pan out from here…

Regards,

Larry Benedict
Editor, Trading With Larry Benedict