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Restoration Hardware Stock Plunges In The Last Two Weeks, Options Traders Capitalize

RH (RH) - ★★★★ - Ranked #32 in our Q2 2024 SMID Equity Rankings


Restoration Hardware (RH), the high-end home furnishings retailer, has seen its stock price take a beating in the past two weeks following the release of its latest earnings report in late March. The stock has declined approximately 24% during this period, with the sell-off accelerating on Thursday, April 10th, when the shares dropped over 9% in a single trading session.


Technical Analysis:

The RH stock chart shows a concerning technical picture. The share price has recently broken below the 50-day and 100-day moving averages, which are widely watched indicators of the medium-term trend. This breakdown suggests a potential bearish shift in the stock's trajectory.


source: TradingView


Furthermore, the volatility in the stock price is evident from the large swings up and down over the past year. The sharp decline on April 10th, with the stock closing at $260.48, represents a significant technical breakdown that could lead to further downside.


Options Market Implications:

Interestingly, the May 17th, 2024 expiration $320 put option contract on RH has seen a dramatic surge in value, increasing over 500% during the same two-week period. This indicates that options traders have been actively positioning for, and potentially profiting from, the stock's recent decline.


The sharp rise in the value of this put option suggests that some market participants anticipated the sell-off in the stock and sought to capitalize on the downside move through options trading strategies.


Restoration Hardware's recent earnings-driven stock decline, coupled with the technical breakdown and the options market's reaction, paint a challenging picture for the company and its shareholders. Investors and traders will likely continue to closely monitor the stock's performance and watch for any signs of stabilization or further downside. The options market activity, in particular, underscores the significant bearish sentiment surrounding the stock in the near term.


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The information provided in this report is for general informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. The opinions expressed in the report are our own and are subject to change without notice. We may have a position in the securities mentioned in the report, and we may buy or sell such securities without notice. Any investment decisions made based on the information in this report are solely the responsibility of the recipient. We do not accept any liability for any direct, indirect, or consequential loss arising from any use of this report or its contents.


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