Home Depot Surges 2.65% Amid Regulatory Scrutiny and Strategic AI Push – What’s Fueling the Rally?

Summary
• The Home Depot (HD) trades at $360.44, up 2.65% intraday, breaking above its 52-week low of $326.31
• Options volume spikes on 2025-12-19 expirations, with $360 call options seeing 226,655 shares traded
• UBS upgrades HD to Buy with $430 target, citing Pro customer gains and AI-driven tools

Home Depot’s stock is surging amid a mix of regulatory uncertainty and strategic innovation. With the stock trading near its 52-week high of $426.75, investors are weighing the impact of an ongoing investigation and the company’s AI-powered blueprint takeoffs. The options market is heating up, with high leverage ratios and implied volatility suggesting aggressive positioning.

Regulatory Scrutiny and AI Innovation Drive Volatility in Home Depot Shares
The Home Depot’s intraday rally is fueled by a dual narrative: an ongoing investigation into corporate practices and the launch of an AI-powered blueprint takeoff tool for Pro customers. While the investigation creates short-term uncertainty, the AI tool—designed to streamline project planning for contractors—positions HD as a leader in digital transformation. This duality has attracted both risk-off and risk-on capital, with options traders betting on a breakout above key resistance levels.

Home Improvement Sector Gains Momentum as Lowe’s Outperforms
The Home Improvement Stores sector is mixed, with Lowe’s Companies (LOW) rising 1.36% on improved Pro customer metrics. HD’s 2.65% gain outpaces peers like Floor & Decor (-30.2%) but lags behind FGI Industries’ 117.2% surge. The sector’s divergence highlights HD’s focus on Pro expansion versus competitors’ retail-centric strategies.

Options and Technicals: Aggressive Calls on AI-Driven Momentum
• 200-day MA: $374.85 (above current price), RSI: 61.37 (neutral), MACD: -5.93 (bullish histogram)
• Bollinger Bands: Upper at $372.75, Lower at $330.02 (price near upper band)
• 30D Support: $350.63–$351.65, 200D Resistance: $366.98–$368.80

Home Depot’s technicals suggest a breakout scenario, with the 200-day MA acting as a dynamic support. The RSI’s neutrality and MACD’s positive histogram indicate gathering bullish momentum. Options traders are eyeing the 2025-12-19 expirations, where high leverage ratios and moderate deltas align with a continuation trade.

Top Options Picks:
• HD20251219C360: Call, Strike $360, Expiry 12/19, IV 24.78%, Leverage 64.83%, Delta 0.5056, Theta -0.59697, Gamma 0.028477, Turnover 226,655
• HD20251219C365: Call, Strike $365, Expiry 12/19, IV 23.36%, Leverage 114.22%, Delta 0.3583, Theta -0.4807, Gamma 0.028284, Turnover 229,617

HD20251219C360 offers a balanced risk-reward profile with a 64.83% leverage ratio and moderate delta, ideal for a 5% upside scenario (projected payoff: $146.67). HD20251219C365 provides higher leverage (114.22%) and strong gamma, making it suitable for a sharp move above $365. Both contracts benefit from high turnover, ensuring liquidity. Aggressive bulls should consider HD20251219C360 into a test of the 200D MA at $374.85.

Backtest The Home Depot Stock Performance
The backtest of HD's performance following a 3% intraday increase from 2022 to now reveals a significant underperformance. The strategy yielded a return of -16.00%, lagging the benchmark by 60.42%. With a maximum drawdown of 0.00% and a Sharpe ratio of -0.17, the strategy showed no risk mitigation capabilities.

Breakout or Bluff? HD’s AI Push and Regulatory Risks Define Near-Term Outlook
Home Depot’s rally hinges on its ability to balance regulatory headwinds with AI-driven Pro customer growth. The stock’s proximity to its 52-week high and UBS’s $430 target suggest a bullish case, but margin pressures and inventory inefficiencies remain risks. Sector leader Lowe’s 1.36% gain underscores competitive dynamics. Investors should monitor the 200D MA at $374.85 and the $365 strike for options positioning. Watch for a breakout above $368.80 or a breakdown below $350.63 to define the next move.