Lowe’s Companies, Inc. (LOW) is a home improvement retailer operating more than 1,700 stores across the United States and North America. The company’s stock is currently trading around $51.15 in a 52 week range of $33.73-$52.08. Shares of LOW have been massively outperforming the market this year adding nearly 46% to share prices year to date. LOW is set to report their most recent quarterly earnings tomorrow morning before the market open. Analysts are expecting LOW to report earnings of $0.48 per share on revenues of $12.7 billion. Historically LOW has been strong on earnings day. Over the past 8 quarters the stock has rallied 5 times on earnings day with an average upside move of 2.75%. In addition to this strong historical performance LOW is also trading well on a chart. The stock is trading well above the Ichimoku Cloud and the future cloud is indicating there could be more upside in store for LOW. We believe that the strong historical performance and good technical setup provide a good opportunity to get long LOW ahead of earnings. With the options market currently implying a move of around $2.10 by this Friday’s expiration we can set up a trade with an upside target of $53.25.
Trade: Buying the LOW Nov 22nd 52.5-53.5 Call Spread for $0.25
Risk: $25 per 1 lot
Reward: $75 per 1 lot
Breakeven: $52.75
