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Trends & Analysis
News

Cisco Systems shares slide despite strong earnings

News

Has a Trump victory shifted Tesla into overdrive?

News

European stocks shed most in over 3 months

News

Gold Price Takes a Hit Amid Trump Trade Expectations

News

Should Pinterest pique your interest?

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Euro falls on tariff concerns, Bitcoin nears $90K

Asset Watch

Is Home Depot a source of alpha?

Tuesday, October 17, 2023

With rapidly rising interest rates creating headwinds for the U.S. housing sector, homebuilders have suffered mightily. Higher Treasury yields precede higher mortgage rates, which stifles demand for new and existing homes.

 

However, despite plenty of carnage, Citigroup told clients on Oct. 13 that homebuilder stocks are ripe for a relative rally. Analysing 55 single-day declines of more than 5%, the team found housing stocks outperform the S&P 500 58% of the time over the next 30 days, 69% of the time over the next 90 days, and 78% of the time over the next 180 days.

 

And as Home Depot suffers from the same affliction, could a comeback be in the cards over the medium term?

The stock’s 200-week moving average has been a major support level since mid-to-late 2022, and a close below the milestone occurred in March 2023 before a profound rally. Similarly, Home Depot closed below its 200-week MA two weeks ago, and an intraweek rally above it was rejected last week.

If Home Depot can recoup its 200-week MA during the homebuilders’ next upswing, it could encourage a move back above $330.

So, is Citigroup on to something, or will higher U.S. Treasury yields continue to hammer Home Depot?


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