Home Improvement Retailers Trade at Record Highs as Housing Data Pours In

Call buying has been very popular on both HD and LOW

by Josh Selway

Published on Dec 19, 2017 at 1:04 PM

Shares of Home Depot Inc (NYSE:HD) and Lowe's Companies, Inc. (NYSE:LOW) hit record highs today, after housing starts for November topped expectations and homebuilder confidence continues to rise. Of course, both stocks are also benefiting from the broader market's surge. When you consider the iShares U.S. Home Construction ETF (ITB) historically averages respective gains of 2.5% and 2.4% in December and January -- according to data from Schaeffer's Quantitative Analyst Chris Prybal -- and with even more housing data coming later this week, it seems like a good time to check in on HD and LOW stocks.

Call Buying Stays Popular on HD

Starting with Home Depot, the Dow component has picked up 0.6% today to trade at $185.91, earlier hitting a record high of $186.72. The shares so far this quarter have humped 13.7%, and have been trading above their 20-day moving average since Nov. 15. BMO is betting on more upside, yesterday upping its price target to $191 from $176.

Turning to options traders, HD has accumulated a 10-day call/put volume ratio of 1.75 during the past 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), showing call buying has almost doubled put buying. But the call option that saw the largest increase in open interest during this time, the January 185 strike, experienced a near even mix of buy- and sell-to-open activity.

LOW Stock Receives Bullish Analyst Note

Lowe's stock this morning got a price-target increase of $7 to $94 at Citigroup, and the shares have so far gained 2% to trade at $89.16. Earlier, the security reached a record high of $89.25, and on a year-over-year basis it's up 22%. This is part of a broader uptrend that's been in place since mid-2011.

LOW options traders have been very bullish, too. This is evidenced by the fact almost eight calls have been bought to open for every put during the past two weeks at the ISE, CBOE, and PHLX. Moreover, the exact 10-day call/put volume ratio of 7.85 is only 4 percentage points from a 12-month bullish extreme.

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