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In the run-up to the U.S. presidential election — and even more so this morning — Treasury yields started soaring. This is bad news for Lowe’s Companies, Inc. (NYSE:LOW) because rising Treasury yields mean rising mortgage rates…and rising mortgage rates mean a weaker housing market…and a weaker housing market means poorer performance for LOW moving forward. This is not a new trend for the company — JPMorgan Chase & Co. (NYSE:JPM) and Wedbush already downgraded their ratings on the company in late October — but it is a trend that is getting worse.

With LOW already in a downtrend, we expect the stock to move back down toward support at $62.50 (the low the stock reached in February) in the run up to, and aftermath of, the company’s earnings announcement on Nov. 16, before the market opens. The stock failed to rally along with the rest of the market on Monday and Tuesday, unable to break above resistance at $67.50, and we see this as a sign that the market has lost confidence in LOW.

 ‘Buy to open’ the LOW December 65 Puts (LOW161216P00065000) for a maximum price of $1.60.

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