Home Depot (HD) Options Signal Bullish Rebound Potential Amid Oversold RSI and Strategic Acquisition Catalysts

• Home Depot (HD) trades at $404.89 (-0.47%) amid a short-term bearish trend but long-term bullish setup
• Options market shows 0.83 put/call open interest ratio with heavy put OI at $400-$405 and call OI at $425
• RSI at 37.87 suggests oversold conditions while Bollinger Bands indicate potential rebound near $403.09 support

The confluence of technical indicators and options positioning suggests a high-probability short-term rebound for Home Depot, despite ongoing bearish momentum. With RSI in oversold territory and a long-term bullish 200D MA at $382.99, the stock appears poised for a correction from its recent pullback. The key question is whether options market positioning reflects a defensive bearish stance or a strategic setup for a breakout.

Bear Put Dominance vs. Call Call Volatility at $425

The options chain reveals a clear bearish bias in open interest, with puts dominating at key levels. The $400 put (OI: 1,618) and $405 put (OI: 1,431) for Friday expiration represent the largest put positions, while the $425 call (OI: 3,294) stands out as the most heavily positioned call. This distribution suggests institutional hedging against a potential decline below $400, but also significant speculative positioning for a rebound above $425.

The put/call ratio of 0.83 (put OI: 100,431 vs. call OI: 120,444) indicates a bearish bias in open interest, yet the heavy call OI at $425 suggests some conviction in a short-term upside move. This duality creates a strategic trading opportunity: a bear put spread at $400/$405 could capitalize on downside risk, while a call debit spread at $415/$425 might benefit from a rebound. The absence of block trades adds clarity, as no large institutional moves are distorting the options landscape.

GMS Acquisition and Dividend Fuel Long-Term Optimism

The completion of the $5.5 billion GMS acquisition and the $2.30 quarterly dividend announcement provide critical context for the stock's fundamentals. The acquisition strengthens SRS Distribution's position in building materials, creating cross-selling opportunities for professional contractors. CEO Ted Decker's emphasis on "serving the Pro customer base more holistically" aligns with Home Depot's strategic focus on high-margin B2B sales.

The dividend announcement, coupled with Q2 results showing $45.3 billion in sales and reaffirmed guidance, reinforces the company's long-term value proposition. While the stock's short-term technicals remain bearish (MACD histogram at -2.44), the 30D MA at $411.46 and 100D MA at $383.02 suggest a broader bullish trend. The recent 3% post-earnings rally further supports the idea that the market is pricing in long-term growth despite near-term volatility.

Actionable Trade Setups for HD

For options traders, the most compelling setups involve leveraging the current price structure and options positioning:

• Bear Put Spread (Friday Expiry): Buy $400 puts (OI: 1,618) and sell $405 puts (OI: 1,431). This strategy profits if HD closes below $400 by Friday, with limited risk and a 5-point range for maximum gain. The high put OI at these strikes indicates strong demand for downside protection.

• Call Debit Spread (Next Friday Expiry): Buy $415 calls (OI: 935) and sell $420 calls (OI: 359). This setup benefits from a rebound above $415, with the $420 strike acting as a natural resistance level. The 30D support/resistance range (407.34-407.91) provides a key entry trigger.

For stock traders, the most attractive entry point is near $403.48 (intraday low) with a stop-loss below $403.09 (lower Bollinger Band). A successful rebound would target the 30D MA at $411.46, with a secondary objective at the 100D MA at $383.02. The 200D support at $367.51 represents a critical downside threshold that, if broken, would validate a deeper correction.

Volatility on the Horizon

The coming weeks will test Home Depot's ability to balance short-term volatility with long-term growth. The Q2 earnings call on August 19 and the Goldman Sachs presentation on September 3 will provide critical insights into the GMS integration progress. Traders should monitor the 30D support/resistance range (407.34-407.91) as a key battleground for the stock's near-term direction. While the options market remains cautiously bearish, the technical setup and fundamental catalysts suggest a high-probability rebound scenario for those willing to position strategically.