Home Depot rising on possible spin-off

Posted Feb 12th 2007 12:47PM by Brent Archer
Filed under: Major Movement, Good news, Rumors, Competitive Strategy, Home Depot (HD), Options

Home Depot Inc. (NYSE: HD) opened at $41.62. So far today the stock has hit a low of $41.33 and a high of $42.01. As of 11:00 this morning, HD is trading at $41.45, up 0.45 (1.1%).

After hitting a one year high of $43.95 March 23, 2006, the stock tumbled to a year low of $32.85 on July 18, 2006. Since that low, the stock has climbed to where it now stands, up today on news of a potential spin-off of its HD Supply business. The technical indicators for HD have been bullish and slightly deteriorating and S&P gives the stock its top rating of 5 STAR strong buy.

For a bullish hedged play on this stock, I would consider a May bull-put credit spread below the $37.50 range. HD hasn't been below $37.50 since November and has shown support around $40.40. This trade could be risky if the recent changes to management don't produce any real results or if the economic indicators start to sour.

Brent Archer is an analyst on the move at Investors Observer (Free Subscription). DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about.

Tags: HD, Home Depot, HomeDepot