Bearish Sentiment Could Give Out Ahead of Lowe's Earnings

Lowe's Companies Inc (NYSE:LOW) stock is down 1.4% at $228.28 today as its recent rally stalls, though the shares hit their highest level since May earlier today before turning lower. Over the last month, the equity has added 21%. 

LOW sports a 10-day put/call volume ratio of 1.69 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which stands higher than 96% of readings from the past year. Such elevated bearish sentiment could be an intriguing contrarian signal for LOW, especially given its historically bullish implications.

Over the last three years, there have been five instances in which the equity's 10-day buy-to-open put/call ratio crossed above 1.0 and moved into the 90th percentile. Per Schaeffer's Senior Quantitative Analyst Rocky White, the stock was higher one month later 80% of the time after these signals, averaging a 4.1% gain.

Be aware of some potential volatility with earnings on the table next week. Lowe's is scheduled to announce its third-quarter report before the open on Wednesday, Nov. 18. Much like Home Depot (HD) stock, however, LOW has a history of fairly muted post-earnings reactions, averaging a 2.4% next-day move in either direction over the last 12 reports.