Intel and Home Depot Continue to Surge, but Will it Last?

In a volatile trading environment, finding high performance stocks can sometimes prove to be difficult a difficult task. No matter what seems to be going on, however, there are stocks that manage to outperform the market and deliver consistent gains. During market downdrafts, such stocks are able to weather the storm, waiting for the eventual market turnaround to make their aggressive move higher (a phenomenon known as “relative strength”). Such has been the case with shares of two very well known companies over the past few months – Home Depot HD and Intel INTC. These stocks have climbed aggressively since August, and both hit fresh 52-week highs in Tuesday's session. The S&P 500 (SPX), by comparison, remains 8.2% below its 52-week high of 1370.58 (05/2/11). Home Depot Shares of Home Depot have been a tear since hitting a 52 week intra-day low of $27.92 on August 9th. Since hitting that low, the stock has surged to its current trading price of $38.07 – a 36.4% gain in just over three months. On Tuesday, the stock traded above the previous 52-week high of $38.54, which was set on February 22 (earnings day). After trading up to as high as $38.74 on Tuesday, shares began to retreat, closing out the session at $38.07. This falter indicates that previous resistance around $38.54 is still a price level to be reckoned with and should be watched closely by both bulls and bears to determine possible future direction. Who Has the Upper Hand? Despite hitting a fresh 52-week high, there are still a few warning signs that investors should be concerned with. The new high achieved in Tuesday's session does not mean much considering that shares were unable to close above the previous high of $38.54. Bulls may want to wait for a firm move/close above the previously mentioned resistance area before jumping back in. Also, the last time shares of Home Depot reached the $38.50 (February 22) area, they sold off aggressively, closing 3.3% below the high of that day. While Tuesday's selloff was not near as dramatic, the stock still closed 1.7% down from the session highs, indicating that buying momentum may be dissipating. Keep an eye on Wednesday's action, as the February selloff consisted of three consecutive losing sessions following the new 52-week accomplishment. Although there may be some concerns, bulls are still staunchly in control. As the six month daily chart below shows, the ascending trend line, which dates back to the August low, currently intersects at $34, and is protected by the 50- and 200-day simple moving averages (SMA). In fact, the 50-day SMA appears poised to cross above the 200-day SMA on the chart, which is a bullish technical indicator known as the Golden Cross.

If shares of Home Depot can close back above $38.50, there is little resistance above, as the stock has not managed a close above that level since 2002!

Intel

Shares of Intel have been moving aggressively higher since September, and on Tuesday hit a fresh 52-week high of $25.46. The former 52-week high was $25.20, recently set on October 27th. Since hitting $19.16 on September 6th, the stock has rallied 32.3% (based on Tuesday's closing price). Yesterday's 2.88% surge shows that bulls are convinced that there are more gains to come, as the stock closed near the highs of the day at $25.34. Bulls or Bears? The rally off of the September 6th low speaks for itself, as a 32% gain in just over two months is extremely impressive. Since that day, the stock has remained in a steep uptrend, making a series of higher highs and higher lows along the way. As the six month daily chart at the bottom of the article shows (click to enlarge), the stock's ascending trend line currently intersects around $22.50, and is currently protected by the 50-day simple moving average ($22.88). Despite recent accomplishments, bulls still have to watch out for resistance at $25.56, which is the stock's 5-year high (12/03/07). If the price is pushed above $25.56, there is little resistance until $30, which was tested multiple times in late 2003 and early 2004. While shares of Intel closed above their previous 52-week high, the $25.20 area remains significant. Failure to hold above this level would indicate weakness, and a break below it may signal a double top, sending bulls rushing towards the exit. Conclusion Home Depot and Intel are likely to attract a lot of attention from both bulls and bears over the coming weeks. There are key levels to watch in both these stocks, and failure to break definitively higher at this point could signal the end of the fantastic bull runs they have experienced over the last three months. Conversely, a decisive move above the 52-week highs could force bears further out of their positions, as new buyers flood the market - potentially leading to significant price advancements. Time will tell.