Lowe’s Companies (LOW) Set to Report Earnings Tomorrow Before the Opening Bell

Lowe’s Companies, Inc (LOW) is a home improvement retailer with over 1,800 locations in North America. The company’s stock is currently trading around $73.22 in a 52 week range of $49.70-$76.25. The stock is seeing a nice move higher today in sympathy with the move higher in Home Depot (HD) after earnings were reported earlier today. LOW has been relatively strong this year with shares rallying just over 6% year to date. The company is set to report their most recent quarterly earnings tomorrow morning before the bell. Based on the strong historical performance of the stock and the solid technical setup it seems like LOW is setting up well for a long ahead of earnings.

LOW stock has rallied on earnings day 7 of the past 12 quarters with an average move of 4.23%. More importantly, the stock has rallied from earnings day through the nearest options expiration with an average move of 4.64%. The stock is also looking strong on a chart. LOW is trading well above the Ichimoku Cloud and both its 9 and 26 period moving averages. With such strong historical movement and a good looking chart I want to set up a long position in LOW. Market makers are currently implying a move of around $2.70 in LOW by this Friday’s expiration so I can use this to calculate an upside target.

With LOW trading around $73.22 I will calculate an upside target of $75.92 and set up a trade.

Possible Trade: Selling the LOW Aug 75-72.5 Put Spreads for $1.40
Risk: $110 per 1 lot
Reward: $140 per 1 lot
Breakeven: $73.60