RH Breakout Could Trigger Short Covering Rally

Furniture retailer RH (NYSE:RH) last week broke out and above the upper boundary of a three-month basing pattern that followed a multi-year low in April. This low was a fake-out move below the April 2025 lows, and just two weeks ago the equity crossed above the 50-day moving average. This crossover tends to have historically bullish returns, per our quantitative data. Previously, a cross below this trendline was a sell signal.

RH had also cleared the pre-earnings close in late-March that preceded a gap lower, which marked a low in the shares. Short interest is at a record high as well. The security has surged more than 30% since its April post-earnings low, and with the shares clearing the pre-earnings close last week, it could ignite short covering in the weeks ahead.
 
Our recommended call option has a leverage ratio of 4.0 and will double on a 29.8% rise in the underlying equity.