Auto stocks are in focus today after China levied a 25% retaliatory tariff on $16 billion of U.S. goods, most notably crude oil and cars. In addition to sector peer Dana Inc (DAN), both LKQ Corporation (NASDAQ:LKQ) and General Motors Company (NYSE:GM) could struggle in the coming months.

LKQ Rally Appears To Have Lost Steam

At last check, LKQ Corporation stock was down 1.1% to trade at $34.06. The auto parts maker has rallied 13% since consolidating near the $30 level in late April, but has not been able to fill the entirety of that earnings-induced bear gap. Overall, LKQ is staring at a 16% deficit for 2018. 

To make matters worse, LKQ found itself on a list compiled by Schaeffer's Senior Quantitative Analyst Rocky White containing stocks with the worst 2018 returns, but have yet to receive proper bearish analyst sentiment. More specifically, of the 12 brokerages covering LKQ, 11 still rate it a "buy" or "strong buy," with zero "sells" on the books. Should LKQ keep struggling, it may prompt these analysts to re-think their bullish stance.

Options traders have been almost exclusively targeting LKQ calls lately. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows 1,797 calls bought to open in the past 10 days, compared to just 13 puts. The resultant call/put volume ratio ranks in the 91st percentile of its annual range, indicating calls have been bought over puts at a faster-than-usual clip during the past two weeks.

General Motors Stock Held In Check By Key Trendline

Looking at General Motors, the stock is flat today at $37.58. Since a mid-June high near the $45 area, GM has given back 16.5%, ushered lower by its 20-day moving average. More recently, the stock gapped lower in late July following a subpar earnings report, running the year-to-date deficit to more than 8%. 

Like LKQ, GM showed up on White's list of stocks vulnerable to bear notes. Of the 15 brokerages covering GM, nine rate it a "buy" or better, with not a single "sell" on the books. In addition, the security's consensus 12-month price target of $46.84 sits at a nearly 25% premium to its current perch. 

Traders looking to take advantage of the equity's struggles may want to do so with near-term options, which are attractively priced at the moment. GM stock currently sports a Schaeffer's Volatility Index (SVI) of 23%, which ranks in the 21st percentile of its annual range. This suggests that near-term options are pricing in relatively low volatility expectations at the moment, which could help maximize the benefit of leverage for premium buyers.

Furthermore, the auto stock has been a good target for premium buyers during the past year. That's according to its Schaeffer's Volatility Scorecard (SVS) of 93 out of 100, which shows it's tended to make much bigger-than-expected moves on the charts compared to what the options market was expecting.

The shares of optical components maker Finisar Corporation (NASDAQ:FNSR) have added 7.5% in the past week. However, FNSR stock is flashing a historic "sell" signal on the charts -- and the bearish alarm has yet to be wrong. As such, now might be the time to consider short-term puts on the security.

Jumping right in, Finisar shares are now within one standard deviation of their 200-day moving average, after a lengthy stretch below this trendline. There have been five similar signals of this kind in the past, after which FNSR went on to sink 4.37%, on average, the subsequent week, per data from Schaeffer's Senior Quantitative Analyst Rocky White. One month later, the stock was lower 100% of the time, down an average of 12.26%.

As you can see on the chart below, the equity has been in a channel of lower highs and lows for roughly one year, with highs kept in check by the 200-day moving average. FNSR shares were last seen down 0.2% to trade at $18.24 -- an area that represents a roughly 25% gain from the security's April closing low of $14.67, and a 10% decline year-to-date. From current levels, another 12.26% pullback would put Finisar stock around $16.

Despite the stock's long-term struggles, Wall Street remains enamored. FNSR still sports six "buy" or better ratings, compared to five lukewarm "holds" and not a single "sell." The consensus 12-month price target of $21.09 represents a premium of nearly 16% to the equity's current price, and stands in territory not charted since March. A round of analyst downgrades or price-target cuts could send the shares reeling again.

Meanwhile, options traders have been picking up FNSR calls over puts at a rapid-fire rate. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day call/put volume ratio of 9.92 indicates nearly 10 Finisar calls have been bought to open for every put in the past two weeks. This ratio registers in the 96th percentile of its annual range, pointing to a much healthier-than-usual appetite for bullish bets over bearish of late.

However, short interest represents more than 19% of Finisar's total available float, even after declining 6.6% in the past two reporting periods. Considering FNSR's recent run higher, it's possible some of the aforementioned call buying -- particularly at out-of-the-money strikes -- could be attributable to shorts seeking an options hedge.

Whatever your motive, now is an opportune time to strike on FNSR's near-term options. The stock's Schaeffer's Volatility Index (SVI) of 35% is at the bottom of its annual range, suggesting short-term options are pricing in relatively low volatility expectations for the underperformer.

Online discount warehouse Overstock.com Inc (NASDAQ:OSTK) is gearing up to report second-quarter earnings after the market closes tomorrow, Aug. 9. Last seen trading 4% lower at $36.73, Overstock shares have been moving sideways on the charts since late March, stuck between the $30-$40 levels. OSTK's mid-July breakout attempt was quickly capped by the 120-day moving average, and year-to-date the stock is sporting a 42% deficit. Below, we will take a look at what the options market has priced in for the the stock's post-earnings move.

Looking at OSTK's earnings history, the stock has closed higher or flat the day after the company reports in six of the last eight quarters, including a 30.7% surge in November. Looking back eight quarters, the shares have moved 9.3% the day after earnings, on average, regardless of direction. This time around, the options market is pricing in a 22% move for Friday's trading.

Digging into options, Overstock's Schaeffer's put/call open interest ratio (SOIR) of 0.32 ranks in the low 12th annual percentile. This SOIR reveals that calls outnumber puts by a wider-than-usual margin among options set to expire within three months. Looking closer, the weekly 8/10 40-strike call saw the largest increase in open interest in the past 10 session.

Plus, the online retail concern has been a good purchase for premium buyers during the past 12 months. That's per OSTK's Schaeffer's Volatility Scorecard (SVS) of 85 out of 100, which shows the stock has tended to make much bigger-than-expected moves on the charts compared to what the options market was expecting.

It was another round of negative foodborne illness news for Chipotle Mexican Grill, Inc. (NYSE:CMG) in late July, when upwards of 100 customers reported food poisoning after eating at a Powell, Ohio, Chipotle location. But unlike the string of outbreaks that sent the stock spiraling lower in 2015, CMG has bounced back quickly from its latest bout of bad PR -- and in fact, data suggests that now might be a particularly appealing time for a bullish play on the fast-casual restaurant chain.

In today's session, CMG is fresh off a new 52-week high of $484.90. Meanwhile, the equity's Schaeffer's Volatility Index (SVI) -- a measure of front-month, at-the-money implied volatility (ATM IV) -- currently stands at just 24%. This SVI arrives in the 6th percentile of its annual range, indicating that speculative plays have priced in lower volatility expectations just 6% of the time in the past year.

Chipotle stock's IV levels remain muted beyond the August options series, too. Trade-Alert data shows 30-day ATM IV at 23.8% -- not far from Tuesday's freshly set annual low of 23.6%.

This combination of a high stock price and low IV has had bullish implications for CMG in the past, according to Schaeffer's Senior Quantitative Analyst Rocky White. Since 2008, there has been just one prior occasion where CMG has been trading within 2% of its annual high at the same time its SVI has been in the 20th percentile or lower. Following that prior signal, CMG was up 5% one month later.

Of course, that's a very small sample size -- but there's reason to believe CMG's rally has legs this time around, as well. The stock has been cruising higher since late February along the support of its 20-day, 50-day, and 80-day moving averages, and CMG this week has been accelerating away from its late-June highs in the $475 area.

And from a sentiment perspective, continued short-covering support could help fuel Chipotle shares higher. Short interest fell by nearly 17% in the past two reporting periods, but still accounts for 10.6% of the stock's float. At CMG's average daily volume, it would take nearly five days for all of the remaining bearish bets to be covered.

Meanwhile, with 71% "hold" or "sell" ratings from brokerage firms, there's relatively low risk of analyst downgrades -- but plenty of room for possible upgrades. Price-target hikes seem overdue, too, as the average 12-month forecast among analysts stands at just $450.52. In today's trading, CMG is up 1.4% at $483.89, about 8% north of that consensus target.

Burlington Stores Inc (NYSE:BURL) has been a steady climber in 2018, and earlier today touched a fresh record high of $160.67. Making it even more intriguing, data suggests that now might be an appealing time for a bullish play on the discount retailer. 

At last check, BURL was up 1.4% to trade at $159.98. Meanwhile, the equity's Schaeffer's Volatility Index (SVI) -- a measure of front-month, at-the-money implied volatility (ATM IV) -- currently stands at just 27%. This SVI arrives in the 15th percentile of its annual range, indicating that speculative players have priced in lower volatility expectations just 15% of the time in the past year.

This combination of a high stock price and low IV has had bullish implications for BURL in the past, according to Schaeffer's Senior Quantitative Analyst Rocky White. Since 2008, there has been five prior occasions where BURL have been trading within 2% of its annual high while at the same time its SVI was in the 20th percentile or lower. Following those prior signals, BURL was up 6.31% one month later, indicating fresh record highs could soon be on the horizon.

Looking at the charts, Burlington stock has relied on double-barreled support in the form of its 50- and 80-day moving averages for most of 2018. Longer term, the equity has doubled in the past 12-months, thanks to two earnings-induced bull gaps in March and May. The coat retailer will report earnings before the open on Aug. 30. 

However, near-term options traders have preferred puts. The security's Schaeffer's put/call open interest ratio (SOIR) of 1.06 ranks higher than 82% of all other readings from the past year, meaning speculators are more put-heavy than usual among options expiring in three months or less. There is notable open interest found at the August 150 and 145 puts, most of which has been bought to open, according to data from the major exchanges. Of course, this could be from shareholders using options to hedge.

Luxury apparel stock Ralph Lauren Corp (NYSE:RL) has been in a channel of higher highs and lows since June 2017, with pullbacks contained by its 80-day and 100-day moving averages. The shares have rallied more than 56% in the past year, and notched a three-year high of $147.90 after earnings on July 31, before taking a breather. What's more, there could be more gas in the tank for Ralph Lauren stock, which remains unappreciated on Wall Street. At last check, the shares were up 1.5% at $136.25.

According to data from Schaeffer's Senior Quantitative Analyst Rocky White, Ralph Lauren sports one of the best year-to-date returns in the underloved personal goods sector, yet boasts very few "buy" ratings from analysts -- making it an attractive contrarian trade. Specifically, just 13% of analysts consider RL worthy of a "buy" or better endorsement. A round of well-deserved upgrades could propel the shares even higher.

Short interest on Ralph Lauren stock fell nearly 9% during the most recent reporting period, but still represents more than 11% of the stock's total available float. At RL's average daily trading volume, it would take over eight sessions for shorts to cover their remaining bearish bets. That's ample sideline cash to drive RL to new heights.

Lastly, now may also be an affordable time for short-term traders to jump on the RL bandwagon. This is per the equity's Schaeffer's Volatility Index (SVI) of 26%, which ranks in the 12th annual percentile -- meaning near-term options are pricing in relatively low volatility expectations at the moment.

The Cboe Volatility Index (VIX - 10.72) -- considered the stock market's "fear gauge" -- has dropped roughly 16% already in August, and today is eyeing a sixth straight loss and its lowest close since January. However, recent VIX options activity suggests traders are speculating on (or hedging against) a surge for the index.

The VIX 20-day buy-to-open (BTO) call/put ratio has been rising in recent weeks, and recently clocked in at 5.55 -- the highest since mid-July 2017 (during a similar Nasdaq winning streak, in fact). Echoing that, the 30-day implied volatility skew on VIX options is now at an annual low, suggesting near-term puts have rarely been cheaper than calls in the past year.

In the past two weeks, the deep out-of-the-money VIX December 47.50 call has seen the biggest surge in open interest, with more than 113,000 contracts added. With the VIX currently just below 11, the fear index would need to more than quadruple by the end of the year for these calls to move into the money. Meanwhile, the September 20 and 21 calls, as well as the October 25 call, each saw more than 55,000 contracts added in the past two weeks.

Perhaps some of the recent out-of-the-money VIX call buying is attributable to shorts seeking an options hedge. As of July 31, Commitments of Traders (CoT) data showed large speculators -- a group that has been notoriously wrong on VIX -- were net short VIX futures by the most since mid-December. Plus, the VIX has been known to burst higher in the August-October period.

Whatever the motive, the Cboe Volatility Index has historically popped a week after its 20-day BTO call/put ratio exceeds 5.5. According to data from Schaeffer's Quantitative Analyst Chris Prybal, the VIX has averaged a one-week gain of 9.2%, and was higher 100% of the time after signals since 2010, of which there have been six. That's compared to an average anytime one-week gain of just 1.2%, with a positive rate of 47%, looking at VIX data since 2010.

Likewise, the S&P 500 Index (SPX) tends to dip after the VIX 20-day BTO call/put ratio tops 5.5. One week later, the SPX was down 0.6%, on average, and higher just 33% of the time. That's compared to an average anytime one-week return of 0.2%, with a 60% win rate, looking at data since 2010.

By two months later, however, the VIX has typically reversed lower. The fear gauge was down 2.3%, on average, and higher just once after the last six signals. The S&P 500, meanwhile, was up 2.3%, on average, two months after a VIX options signal -- slightly better than its average anytime two-month gain of 1.9%.

Technology infrastructure concern Switch Inc (NYSE:SWCH) is about to release earnings for the fourth time since going public in October, with the company set to report after the close Monday, Aug. 13. Last quarter, the shares fell 14.9% the day after earnings, and 15.6% the quarter before that. Going by options data, Wall Street is expecting another huge move this time, with implied volatility data pricing in a 12.5% swing for Tuesday's session.

Such a bleak history doesn't bode well for a stock that has struggled so poorly on the charts. SWCH has carved out a series of lower highs and lows since its October IPO. Year-to-date, the equity has shed 24%, guided lower by its descending 120-day moving average since March. SWCH fell to a record low of $11.85 on June 28, and another post-earnings move to the downside could have the stock testing these lows once more. 

Continued technical struggles could spark a flurry of bear notes. Of the 10 brokerages covering SWCH, 70% rate it a "buy" or "strong buy," with zero "sells" on the books. Furthermore, the security's average 12-month price target of $16.82 is a 22% premium to its current perch of $13.85. Downgrades and/or price-target cuts could certainly pressure the beleaguered stock lower.

Meanwhile in the options pits, the top open interest strike by far is the August 15 call, with more than 3,000 contracts outstanding. At the same time, any call activity on SWCH could be coming from short sellers hedging, with more than one-third of the total float tied up in short interest.

U.K.-based energy concern TechnipFMC (NYSE:FTI) is slightly higher in afternoon trading, last seen up 0.3% at $30.07. The stock has pulled back since its late-July post-earnings surge, moving just below its year-to-date breakeven mark. However, now may be an ideal time to buy the dip on the energy name.

FTI stock is now within one standard deviation of its 200-day moving average, after a lengthy stretch above this trendline. There have been three similar pullbacks for FTI in the past, after which the stock went on to average a one-month gain of 5.8%, per data from Schaeffer's Senior Quantitative Analyst Rocky White. Further, the shares could find support atop a trendline that's connected higher lows since November.

In the options arena, the energy stock's Schaeffer's put/call open interest ratio (SOIR) of 0.19 indicates that calls more than quintuple puts among options expiring in the next three months. Further, this SOIR ranks in the 13th percentile of its annual range, meaning short-term speculators have rarely been more call-heavy in the past year.

Digging deeper, it seems traders are expecting a short-term bounce for TechnipFMC stock. The August 32 call saw the largest increase in open interest during the past 10 sessions, with more than 14,000 contracts added during this time frame, and data from the major options exchanges suggests a heavy amount of buy-to-open activity. The August 32 call is now home to nearly 17,000 contracts outstanding -- peak open interest among all strikes.

After spending most of the second-quarter bottoming around the $12.50 level, shares of GameStop Corp. (NYSE:GME) have slowly but steadily battled back from their year-to-date lows. The stock has gained 24% from its May 18 closing low of $12.46, and GME has actually outperformed the S&P 500 Index (SPX) by more than 15 percentage points over the past 40 sessions. However, history suggests that the recent push higher by GME stock might actually be an ideal entry point for a bearish trade.

GME Tends to Fail 200-Day Tests

Specifically, GME has now rallied up to trade within one standard deviation of its 200-day moving average. According to Schaeffer's Senior Quantitative Analyst Rocky White, there have been four occasions over the past three years where GameStop stock has risen to challenge its 200-day trendline after spending a prolonged period of time beneath it -- and the results following prior signals are less than stellar.

In fact, five days after a signal, the stock is down 4.2% on average, with only 25% positive returns. And looking out one month after a GME test of 200-day resistance, the 25% positive rate remains the same -- but the average return widens to a drop of 8.9%. From GME's current perch at $15.47, that would put the shares at $14.09 by this time next month.

This latest GME sell signal coincides with the stock's as-yet unsuccessful attempts to surmount the $15.50 neighborhood. This chart region briefly provided a floor for the shares in February and early March, but has more recently emerged as a troublesome technical hurdle that has kept all of GME's rally attempts in check since mid-June.

From a broader perspective, the stock has been facing pressure at its 200-day moving average for just over two years. Over that time frame, GME has lost about half its value.

Post-Earnings Bias Could Be to the Downside Again

Looking ahead, GME is tentatively expected to report earnings in late August. As such, the equity's 30-day at-the-money implied volatility (IV) is somewhat elevated, at 50.2%. This reading registers in the 74th percentile of its annual range. On the other hand, the stock's 30-day IV skew of 6.2% stands in just the 36th annual percentile, which means short-term GME put options are pricing in a lower-than-usual volatility premium relative to their call counterparts.

That's an interesting development ahead of earnings. Over the past eight quarters, GME has averaged a single-day price swing of 8.5% immediately following its earnings announcement, regardless of direction. Five of those post-earnings moves have been negative, with the average drop totaling 10.4%; meanwhile, the three positive moves delivered an average gain of 5.3%.

With the better part of earnings season winding down this past week, we head into the summer doldrums of August -- a notorious period in the market for volatility spikes when volume tends to dry up. Financial media has been highlighting this seasonally tough period and the current geopolitical risks for the last few weeks in anticipation, but the stock market kept marching higher in the face of headlines on the back of great earnings reports. According to FactSet, so far, the companies in the S&P 500 Index (SPX - 2,833.28) are reporting 24.6% growth in Q2 2018, which would be the second-highest earnings growth since Q3 2010. 

Judging by last week's market action, pundits will point to the S&P 500 reversal on Friday that erased all weekly gains as a potential indicator for a further pullback. The SPX traded in a narrow range mid-week and hovered near 2,865, a dual resistance area, which was identifiable as the index rode the top of a trend channel that formed from the triangle breakout in early May. With the all-time closing high only a chip-shot away at 2,872.87, this area of resistance proved to have plenty of overhead supply. 

Also, it's rare to go straight through all-time-highs without consolidations, justifying a pullback. New geopolitical issues -- the Turkey crisis -- happened to be the perfect excuse for a quick gap down Friday. Although, tariffs issued by the Trump administration last week and the ongoing currency crisis in Turkey's economy should have relatively little effect on the U.S. markets. Note, Turkey is only the 18th largest nation by gross domestic product (GDP), and ranked 31st among the United States' top trade partners.

While the S&P 500 was negative on the week, the Nasdaq Composite (IXIC - 7,839.11) and Russell 2000 Index (RUT - 1,686.80) were able to finish positive, but both indexes were unable to get through round-number resistance areas. The Nasdaq stalled at the 15% year-to-date (YTD) mark, while the Russell hasn't been able to make it through the 10% YTD level during the past two months. The Invesco QQQ Trust (QQQ - 180.52) is searching for support at the 180 level, after pushing through prior resistance and 50% above the 2000 peak earlier in the week. As we mentioned last week, the S&P Mid Cap 400 Index (MID - 1,996.02) is also searching for support near the round-number level of 2,000, after breaking above this area mid-week. 

As for the U.S. economy this past week, the market received few economic updates, with jobless claims, the consumer price index (CPI), and U.S. Department of Agriculture (USDA) crop reports being the only potential market movers. The CPI gained 0.17% for July, which was in line with estimates, and jobless claims came in slightly better than expected. However, the USDA crop reports were negative Friday, as expected, and we saw pressure in the respective commodity markets, which could have added negative pressure to Friday's sell-off.

The market is searching for slumping economic data points, but so far nothing has suggested that a recession is in the near-term future other than the fear of a flattening yield curve. However, we know a flattening yield curve can last longer than most expect and is overblown as a short-term indicator, like I mentioned the other week. 

"This August has been remarkably calm for the stock market, but history suggests it may not last."
-- The Wall Street Journal (subscription required), August 10, 2018

Without slumping economic data points, financial strategists and pundits have relied on seasonality as a potential catalyst for a sell-off. Indeed, August can often be the start of seasonal corrections for the broader markets. That's a fact when you look at the data over the last two decades, but that doesn't mean we're necessarily due for an imminent correction as some have suggested, or that we'll finish negative for the month. 

According to Reuters data, August is the second-worst month on average, dropping 0.33% monthly -- behind only September's average monthly loss of 0.40% -- during the last two decades. When you increase or decrease this time frame, these conclusions can change drastically. 

Taking a longer-term view, we find that August has a positive average monthly return of 0.55% when going back to 1928, and September is by far the worst month, with an average monthly loss of 1.00%. Now, looking at the past decade, August has generated a loss of 0.70%, on average, while September is positive by 0.76% -- a surprising revelation. The point I want readers to take away is, returns vary throughout time. 

When analyzing these seasonal trends and patterns, I found that over the last decade, when the first five trading days in August were positive, except for 2010, the month ended positively. Conversely, when the first five trading days of August were negative, the month ended negatively every time. Thus, this seasonal analysis has some statistical significance, since the prevailing trend has been correct nine times out of 10. 

 "As we mentioned back in June, the month after Fed hikes, the SPY has had a median return of negative 0.42%. This played into our short-term outlook for the last four weeks, but that timeframe is now behind us. According to Reuters data, market participants are currently pricing in a 2.6% chance that the Fed will raise rates on Aug. 1. This could be a potentially bullish catalyst for markets, especially if we are close to testing all-time highs, because the SPY median return after the Fed holds rates is 1.77%."
-- Monday Morning Outlook, July 16, 2018

Devoted readers are also aware that during the current rate-tightening cycle, equity markets have underperformed or experienced a drawdown in the month following a rate hike, while showing a tendency to rally when the Fed holds steady. With both analyses being favorable for August, we could see a positive month, which is contrarian to the broader media news cycle.

"One scenario is that this caution represents buying power in the immediate days ahead, especially with the SPX trading around multi-month highs on the heels of the Fed's 'pause' last week. Another potential scenario is the strategists being correct about the risks, but early on the timing. With an expected rate hike at the September FOMC meeting, which will likely coincide with a ramp-up in midterm election uncertainty, perhaps their case for a pullback becomes stronger roughly six weeks from now."
-- Monday Morning Outlook, August 6, 2018

Sentiment has remained tempered as many market participants have mixed-to-negative views, which further complements a potential bullish scenario for August. In the most recent weekly American Association of Individual Investors (AAII) survey, bullish sentiment increased by 7.3 percentage points, but still isn't even at the historical average of 38.3%, suggesting that retail money remains on the sidelines. Meanwhile, the 10-day equity-only, buy-to-open put/call volume ratio rose again last week and appears to be finding a bottom above 0.60, which last week we mentioned preceded a spring rally. 

Contrary to the above indicators is the Cboe Volatility Index (VIX - 13.16) 20-day buy-to-open call/put volume ratio, which moved to 5.55 and is the most elevated reading since mid-July 2017. We recently highlighted that this could be a red flag for investors. In addition, the VIX hit a low of 10.17 intraday last Thursday. Meanwhile, the Commitment of Traders (CoT) data showed large speculators were net short VIX futures by the most since December. Moving forward, we will keep this on our radar since large speculators have been caught flat-footed ahead of every significant VIX move since 2014.

Continue reading:

• Indicator of the Week: 2 Sectors Contrarian Traders Should Target
• The Week Ahead: Triple Dose of Dow Earnings Next Week
  
  

Home Depot Inc (NYSE:HD) is one of three Dow names slated to report this week, with the company's second-quarter earnings scheduled to surface before the market opens, tomorrow, Aug. 14. Below, we will take a look at how the blue chip has been faring on the charts, and dive into what the options market is pricing in for the stock's post-earnings move.

Last seen slightly higher at $196.56, HD has been moving higher on the charts since bottoming out near $170 and the 200-day moving average in early April. More, recently, the stock has been moving sideways, stuck between $204 and a floor of support near $194, right above the year-to-date breakeven point.

Digging into HD's earnings history, the stock has closed lower the day after the company reports in five of the last eight quarters, including a 2.7% drop this time last year. Looking back eight quarters, the shares have moved 1.4% the day after earnings, on average, regardless of direction. This time around, however, the options market is pricing in a much-bigger 6% move for tomorrow's trading.

In terms of options data, traders have been heavily bullish toward HD. This is per the stock's 10-day call/put volume ratio of 2.93 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which ranks in the 97th annual percentile. In other words, during the past two weeks, calls have been purchased over puts at pace of nearly 3-to-1.

Analysts have also been showing optimism toward Home Depot. Of the 26 firms in coverage, only five carry tepid "hold" ratings. Plus, the home improvement stock's average 12-month price target of $213.07 comes in at an 8.4% premium to current levels.