Home Depot (HD) Surges 3.27% Amid Earnings Woes and Sector Turmoil – What’s Fueling the Rally?

Summary
• Home Depot (HD) surges 3.27% to $347.60, defying Q3 earnings miss and weak housing demand.
• Sector peers like Lowe’s (LOW) rally 3.64%, signaling broader retail resilience.
• Technicals show RSI at 21 (oversold) and MACD -13.26 (bearish), yet price tests 52W high of $436.36.

Home Depot’s stock defied bearish fundamentals today, surging 3.27% to $347.60 amid a sector-wide rebound. Despite missing Q3 earnings and cutting its full-year outlook, the rally hints at short-term speculative fervor. With intraday volatility narrowing between $338.85 and $347.71, traders are betting on a potential bounce from oversold levels.

Earnings Miss and Housing Woes Ignite Short-Term Bounce
Home Depot’s 3.27% rally defies its Q3 earnings miss and weak housing market, driven by speculative buying amid oversold technicals. The company cited 'consumer uncertainty and housing pressure' as demand killers, yet traders are capitalizing on a 21 RSI reading (oversold) and a 3.27% intraday rebound. The move aligns with broader retail sector optimism, as Lowe’s (LOW) surged 3.64%, suggesting a rotation into defensive plays ahead of the holiday season.

Home Improvement Sector Mixed as Lowe’s (LOW) Leads Rally
The home improvement sector showed divergent momentum, with Lowe’s (LOW) surging 3.64% versus Home Depot’s 3.27% rally. Both retailers cut full-year guidance due to weak housing demand, but Lowe’s outperformed on strength in pro sales and home services. The sector’s 3.45% average gain highlights investor preference for defensive plays amid economic uncertainty.

Options and ETFs to Capitalize on HD’s Volatility
• 200-day average: 377.50 (below) • RSI: 20.97 (oversold) • MACD: -13.26 (bearish) • Bollinger Bands: 328.89–399.70 (price near upper band)

Home Depot’s 21 RSI and 3.27% intraday rebound suggest a short-term bounce from oversold levels. Key support at $366.98 (200D MA) and resistance at $384.76 (30D MA) define the near-term range. Aggressive bulls may consider HD20251205C342.5 (strike $342.5, 12/5 exp) for a 46.43% leverage play, while HD20251205P347.5 (strike $347.5, 12/5 exp) offers 60.45% leverage for a bearish hedge. Both contracts show high liquidity (turnover 21,230 and 49,326) and moderate delta (0.728 and -0.469), ideal for directional bets. A 5% upside scenario (target $365) yields 22.5% payoff for the call, while the put’s -45.51% price change ratio signals bearish potential if the rally falters.

HD20251205C342.5: Call option with 46.43% leverage, 16.36% IV, and 0.728 delta. High gamma (0.0335) and theta (-0.435) suggest rapid price sensitivity and time decay, ideal for a short-term breakout.
HD20251205P347.5: Put option with 60.45% leverage, 25.65% IV, and -0.469 delta. Strong gamma (0.0256) and moderate theta (-0.0569) position it for volatility-driven moves.

Action: Aggressive bulls may consider HD20251205C342.5 into a break above $366.98 (200D MA), while hedging with HD20251205P347.5 to cap downside risk.

Backtest The Home Depot Stock Performance
Below is the back-test report for “HD 3 %-Surge Strategy” from 1 Jan 2022 through 25 Nov 2025. A visual dashboard has been embedded for convenient inspection of conditions and results.```jgy-json-canvas{ "show_type": "jgyNewLowcode", "config": { "type": "iwcapp/stockBackTestTool", "version": "0.0.3", "url": "//cdn.ainvest.com/frontResources/s/foiegras/stockBackTestTool/0.0.3/stockBackTestTool@0.0.3index.js" }, "data": { "columns": [ { "index_name": "strategy_basic_info", "key": "strategy_basic_info", "type": "Object" }, { "index_name": "backtest_condition", "key": "backtest_condition", "type": "Object" }, { "index_name": "backtest_result", "key": "backtest_result", "type": "STR" } ], "datas": [ { "strategy_basic_info": { "name": "HD 3%-Surge Strategy", "description": "Go long on The Home Depot (HD) at every close where the stock finishes the session ≥ +3 % versus the previous close; exit at next-day close." }, "backtest_condition": { "object": { "display_name": "Object", "type": "ticker", "ticker": ["HD"] // “HD.N” minus the suffix per schema rule }, "open_signal": { "display_name": "Open Signal", "type": "criteria", "criteria": "daily percent change ≥ 3 %" }, "sell_signal": { "display_name": "Close Signal", "type": "specified_date", "specified_date": ["T + 1 close"] // one-day holding horizon auto-generated } }, "backtest_result": "https://cdn.ainvest.com/backtest/agent/session/784562/b2c1a022-462b-49c6-8bbd-0d00334555a3/bcb6d8f0-1184-488f-82dd-8e47d3956717/HD_3pct_surge_backtest.json" } ] }}```Key metrics quick view • Total Return (cumulative): +4.25 % • Annualised Return: 3.97 % • Max Drawdown: 28.67 % • Sharpe Ratio: 0.17 Interpretation 1. Opportunity Frequency: HD closed ≥ +3 % only a handful of times during the period, so return equals average trade return. 2. Risk-adjusted result is weak (Sharpe ≈ 0.17) and drawdown substantial, indicating limited edge. 3. Strategy performs best in short-lived rebounds; consider adding risk limits (e.g., 8 % stop-loss, 12 % take-profit) or widening the exit window to 3-5 trading days to capture continuation. Feel free to click the dashboard to drill down into each trade record and equity curve, or let me know if you’d like to tweak holding rules, add risk controls, or test other thresholds.

Bullish Bounce or Bearish Setup? Key Levels to Watch
Home Depot’s 3.27% rally masks underlying weakness in housing demand and earnings, but oversold technicals and sector rotation suggest a short-term bounce. Traders should monitor the $366.98 (200D MA) support and $384.76 (30D MA) resistance. A break above $366.98 could validate the rally, while a drop below $366.98 would signal bearish continuation. Lowe’s (LOW), up 3.64%, remains the sector leader, offering a benchmark for retail sector sentiment. Action: Watch for a $366.98 breakout or breakdown to decide between bullish calls or bearish puts.