Retail giant Home Depot (HD) has been swept lower by the recent bout of broad-market volatility, but the stock’s chart is suggesting that a bottom -- and a possible buying opportunity -- may soon be in place for the blue chip, says Elizabeth Harrow of Schaeffer’s Research.

Thanks to the confluence of a significantly supportive moving average, a bullish continuation pattern, and a psychological boost from some key round-number returns, HD may soon be due to resume its longer-term uptrend.

First, we have the stock's 200-day moving average, currently located around $170.69.

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Data from Schaeffer’s Senior Quantitative Analyst Rocky White shows that on the seven prior occasions where HD has staged comparable pullbacks to this trendline in the course of a broader uptrend, the stock has been higher 71% of the time five days later, and 67% of the time after a month. The equity's average returns over those time frames following a 200-day test are 1.70% and 3.11%, respectively.

The positive slant of HD’s previous 200-day tests is further reinforced by the fact that a separate study by White showed that this widely followed moving average has been one of the most effective technical indicators over the past 12 months. Based on signals from S&P 500 component stocks, the 200-day moving average has delivered some of the strongest average and median returns over the following month (second only to the 50-day trendline).

Plus, HD appears to be nearing the apex of a falling wedge pattern, which often precedes a continuation of the prevailing uptrend.

Traders looking for confirmation that the stock is set for another leg higher will want to watch for a daily close above the upper rail of this chart formation, which is currently situated around $176 -- just above $175.91, which marks a 50% retracement of the rally from the July 2017 closing low to the late-January closing high.

Even if we do see continued day-to-day volatility in the short term -- which could potentially hinder what appears to be an imminent technical breakout from this Dow component -- strong support appears to be in place around the $170.50 region.

This area marked intraday lows on April 2 and April 4, and it roughly coincides with a 10% year-to-date decline for HD. The site of this “round-number return” could continue to hold up a floor going forward, which could create opportunities for traders to capitalize on the combination of strong technical support and heightened volatility by selling short put spreads.

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