The homebuilders have been soaring this year, but one technician says there could be trouble ahead for one surging name: D.R. Horton.
The company has been on a tear, jumping 77 percent in 2017 and hitting another all-time high on Monday. The homebuilder is the largest component in the ITB, the ETF tracking U.S. home construction stocks, currently making up more than 13 percent of the group.
Carter Worth, of Cornerstone Macro, said that the ITB has broken out, but warns that the stock could see a check-back to the 150-day moving average trend line. "I'm going to make the bet here that this is at a point due for some sort of move back to trend, which is kind of how things work."
Looking at the ITB's relative performance to the broader market, Worth pointed out that while the ETF has gone up, its performance relative to the has remained flat. "It has made no progress [relative to the market], in fact it's at the same level it was going back to the 2009 low," Worth said. "So it seems to me, we're up against an inherently difficult level here, and this is where you're likely to pause."
Specifically, Worth alluded to the big run D.R. Horton has seen recently. He noted that the stock has moved back above the highs it made in 2005 and is poised for a pullback. "I want to fade this. I think it's excessive ... I think if you've got great profits in it, take your money and run," Worth said.
D.R. Horton shares were trading in the $48.35 range midday Monday.