Home Depot (HD) Earnings Preview

Home Depot (HD) is a retailer of home improvement products and services with operations in North America and U.S. territories. The company operates nearly 2,300 stores in those regions. Home Depot’s stock is currently trading around $120.40 in a 52 week range of $82.85-$120.75. The stock has been strong this year, rallying 14.67% year to date. Home Depot is set to report their most recent quarterly earnings tomorrow before the market open and all data points are signaling for a potential bullish trade signal ahead of the report.

HD has rallied 9 of the past 12 quarters on earnings day with an average move of 3.28%. The stock has also rallied from earnings day through the nearest options expiration 9 of the past 12 quarters. The stock is also looking very strong on a chart. Currently HD shares are trading well above the Ichimoku Cloud and both the 9 and 26 period moving averages. With the options market implying a move of around $4.10 by this Fridays close I can look for an options spread that gets me long HD with a maximum profit at the implied upside target of $124.50.

Possible Trade: Buying the HD Aug 123-125 Call Spreads for $0.50
Risk: $50 per 1 lot
Reward: $150 per 1 lot
Breakeven: $123.50