The retailer is expected to report earnings before the open tomorrow
Lowe's Companies, Inc. (NYSE:LOW) stock is taking a hit today amid sector peer Home Depot's (HD) abysmal earnings reaction. The stock is down 1% to trade at $113.87, just one day before the hardware retailer takes its own turn in the earnings confessional tomorrow morning.
A post-earnings bull gap in late-August sent LOW skyrocketing, and a pullback from there found support at the $106 region, which coincides with its 120-day moving average. LOW just hit a new six-month high of $116.80 yesterday, before pivoting lower and succumbing to familiar pressure at the $116 level. Today, Lowe's stock is once again testing its footing at recent support at its 20-day moving average.
Looking back, LOW has notched some pretty big post-earnings swings during the last two years, including that previously mentioned late-August surge, and another 10.4% pop in May 208. On the other hand, the security suffered a next-day loss of 11.8% during its May 2019 report. In these last eight sessions, the stock has averaged a 6.8% move, regardless of direction, which is being eclipsed by the 11.4% next-day pop the options pits are currently pricing in.
Speaking of the options pits, contracts are running red hot ahead of the event, with 7,009 calls and 6,882 puts across the tape so far -- four times the average intraday amount. It looks like most of this action is taking place at the January 2020 110-strike put and the 115-strike call. The weekly 11/22 133-strike call is also popular, with new positions being opened here.
While bears are catching up in today's trading, options players have been picking up bullish bets lately. On the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) LOW sports a 10-day call/put volume of 1.56 that sits in the 63rd percentile of its annual range, suggesting a slightly bigger appetite for calls over puts as of late.
Should tomorrow's quarterly report go by the way of Home Depot, the door could be wide open for analyst downgrades. Right now, 17 of the 23 in coverage call HD a "strong buy, with not a single sell to be seen. Plus, the consensus 12-month target price of $125.71 has yet to be touched on the charts.