Toll Brothers stock has plenty of technical support keeping it aloft
Homebuilding name Toll Brothers Inc (NYSE:TOL) is trying to break out of a small flag/wedge-like pattern on the charts. The shares' ascending 40-day moving average contained pullbacks all summer. There's additional support that has recently come into play at both the stock's +10% year-to-date and year-over-year breakeven levels, making TOL an intriguing bullish play going into the fall.
A shift in sentiment among analysts could provide tailwinds. Of the 13 brokerages in coverage, 9 dole out "hold" or worse ratings. And while short sellers have been in covering mode since May, a healthy 6.4% of TOL's total available float is still sold short. Considering short interest was near its highs back in May, there's ample more pessimism to unwind and push the equity higher.
What's more, the stock's Schaeffer's Volatility Scorecard (SVS) sits high at 86 out of 100. This means TOL has tended to exceed option traders' volatility expectations during the past year -- a boon for option buyers. Our recommended call option has a leverage ratio of 4.1 and will double in a 24.1% rise in the underlying equity.
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