A Pre-Earnings Look at Home Depot Stock

HD is underperforming the broader market

Jake Scott

Deputy Editor

May 11, 2023 at 12:49 PM

Home improvement retailer Home Depot Inc (NYSE:HD) is down 0.7% at $287.08 at last check. Next week will be a big one for the stock, with the company's first-quarter earnings report due before the market opens Tuesday, May 15.

Home Depot stock has closed lower the day after four of the company's past eight quarterly outings, including a 7.1% dip following its February report. Overall, the shares have averaged a 4.1% move the day after reporting, regardless of direction. This time around, the options market is pricing in a 5.5% swing for Wednesday's trading.

HD is underperforming the broader market, down 9.1% in 2023 versus the SPDR S&P 500 ETF Trust's (SPY) 7.6% lead over the same time frame. The shares' post-earnings bear gap pushed it below its 300-day moving average, a trendline that just rejected HD's most recent rally attempt.

HD Chart May 112023

Despite this underperformance, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows the Lowe's (LOW) competitor with a 50-day call/put volume ratio of 1.81, which ranks in the highest possible annual percentile. In other words, an unwinding of this optimism could send the shares lower after earnings.

Follow @Schaeffers

Minimize Risk While Maximizing Profits

There is no options strategy like this one, which consistently minimizes risk while maintaining maximum profits. Perfect for traders looking for ways to control risk, reduce losses, and increase the likelihood of success when trading calls and puts. The Schaeffer’s team has over 41 years of options trading success targeting +100% gains on every trade. Rest assured your losses are effectively limited to your initial cost at the time of making your move! Don't waste another second... join us right now before the next trade is released!