Lagging Dow stock Home Depot, in a correction, could run into more trouble

Home Depot shares were on a terrific run, but the company's recent underperformance is becoming more pronounced.

The stock was on fire. It rallied hard following the U.S. election in 2016, and last year rose 41 percent for its best year since 2012.

However, the stock has been underperforming quite badly since the broad market topped out in late January.

Even though the broad indices have bounced strongly from the lows earlier this year, Home Depot has actually fallen below its February closing lows and still stands in correction territory, off 14 percent from its 52-week high.

We'd also note that since the beginning of March, Home Depot is down 2 percent while the ITB home construction exchange-traded fund has rallied 6 percent in the same time.

In other words, Home Depot is not only underperforming the broad stock market, but is suddenly underperforming the group with which it's typically highly correlated.

I don't want to overstate the significance of its recent underperformance — at least, not yet. Home Depot is still trading well above its 200-day moving average, well above its trend line from the 2016 election, so the recent action is not a disaster.

However, if its underperformance continues, it could certainly raise a yellow warning flag on this stock after an excellent run.

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Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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