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As interest rates fall, one technical analyst sees an unexpected Dow winner

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One Dow stock on path to new highs, technician says

Rates are on watch ahead of the Federal Reserve announcement on monetary policy Wednesday afternoon.

The yield on the 10-year Treasury note ticked higher Wednesday morning after hitting a 20-month low a day earlier.

A dovish Fed, and falling interest rates, should kick off a rally in one Dow stock, says Todd Gordon, founder of TradingAnalysis.com.

"We're looking at Home Depot here, " Gordon said on CNBC's "Trading Nation " on Tuesday. "We're trying to break out of about a $210 resistance level that's been in place since early 2018. We're trying four times here and it looks like with this particular market … we might finally be able to get this breakout."

Home Depot touched $210 before falling back to below $208. It briefly traded above that level in September.

The rally in bond prices, which move inversely to yields, should provide a tailwind to the stock, adds Gordon.

"The TLT U.S. Treasury bonds [ETF], this is the 20+ U.S. Treasury, so this is basically the 20+-year maturity bonds. Obviously bonds moving up, you'll remember interest rates moving down is helping the housing sector and obviously Home Depot would be a beneficiary of that, " Gordon said.

However, Home Depot has yet to catch up to the surge in the price of long-term bonds.

"There's actually a little bit of intermarket divergence here. So TLT has broken … those 2018 highs which clearly you can see Home Depot has not yet, so perhaps bonds are acting as a leading indicator here," said Gordon.

To take advantage of an expected move higher, Gordon is buying the 210 call and selling the 230 call. This bullish options bet projects a move as high as $230 before Sept. 19 expiration. A move to $230 implies 11% upside and would mark a record high.