Homebuilding Stock Staring Down Headwinds

Toll Brothers stock has broken -- and stayed -- below a key trendline

Apr 4, 2025 at 2:12 PM

Subscribers to Schaeffer's Weekend Trader options recommendation service received this TOL commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

Homebuilding name Toll Brothers Inc (NYSE:TOL) has suffered a series of lower lows since December, breaking beneath its July 2024 bottom earlier this month. The shares also made a fakeout move back above this area last week, but eventually closed below it. There has been a follow through of selling following the stock’s mid-February negative earnings reaction, too, making now the perfect time to buy puts.

TOL is in the red double digits both for 2025 and over the past 12 months, despite optimistic analysts. Of the 18 in coverage, 11 carry a "buy" or better rating, leaving ample room for downgrades. Shorts are building their positions as well, with short interest climbing off a multi-year low.

Our recommended June put has a leverage ratio of 5.2, and will double on a 14.5% drop in the underlying shares.

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