Toll Brothers Stock Pulls Back from Highs Following Downgrade

TOL's recent rally culminated in a 15-year high, though

Deputy Editor
Jan 28, 2021 at 10:21 AM
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The shares of Toll Brothers (NYSE:TOL) are cooling off from yesterday's 15-year high near the $54 level, down 2.8% at $52.03 at last check, after a downgrade from Wedbush to "neutral" from "outperform." The analyst in coverage noted that though the stock has moved past the firm's $53 price target, they don't see a good enough catalyst to adjust its objective, or raise earnings their estimates. 

Digging deeper, the stock bounced off the 160-day moving average in early January, breaking through overhead pressure at the $49 mark before rallying to its recent highs. Plus, TOL has added 117.7% in the last nine months, with today's dip on track to break an impressive nine-day win streak.

Today's breather may have already been in the cards for Toll Brothers stock, too. This is per the security's 14-day Relative Strength Index (RSI) of 78, which sits in "overbought" territory.

Analysts were evenly split on TOL coming into today, with seven of the 14 in coverage carrying a "buy" or better rating, and the remaining seven calling it a lukewarm "hold" or worse. Meanwhile, the 12-month consensus price target of $51.60 is a 1.7% discount to current levels.

An unwinding of pessimism has likely given the equity some technical support on the charts this month, as short interest is down 11.1% in the last two reporting periods. Still, it represents 5.2% of the stock's available float, and would take over three days to cover at TOL's average pace of trading. 

Today's bear note seems to be attracting additional pessimism, though. So far, 824 puts have crossed the tape, which is twice the average intraday amount. Most popular are the 2/26 6.50- and 52.50-strike puts, where new positions are currently being opened.

Lastly, the security's Schaeffer's Volatility Scorecard (SVS) sits at a high 96 out of 100. This means TOL has exceeded option traders' volatility expectations during the past year -- a good thing for options buyers.

 

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