Finally Added Home Depot and Lowe's To My Short List
Credit Suisse downgraded the Home Depot and Lowe’s yesterday citing slowing earnings growth due to higher interests rates weighing on home affordability.
Analyst Seth Sigman stated:
He writes that home improvement has been performing well, but while he still expects earnings per share to grow, there’s less upside over the next 12 months, relative to estimates, while crucial factors underpinning the stocks’ valuations have become less favorable.
The major one of those is home prices. Sigman believes we’ll see more moderation, as higher rates weigh on affordability, and inventory begins to creep higher. That’s important because house prices have been a major driver of big home-improvement projects, which in turn have lifted average ticket growth and led to healthy comparable sales at retailers.
I have been talking about the housing market turning sour for months and was just waiting to add the home improvement retailers to my short list.
The chart of Home Depot showed negative divergence several months ago and is now at a five month low with further downside to the monthly demand at $160. There will be plenty of room to the downside to short Home Deport once price breaches the $160 level.
I talked about Lowe’s in August and how I thought Bill Ackman who took a stake in Lowe’s was going to take an “L”.
The outlook is not good, and that means considerable pressures for Lowe’s going forward. Lowe's made an all time high of $109 in Jan. before dropping and pulling back from the monthly demand at $79. I personally think price will be range bound for several months, but I think there is more downside risk due to the RSI trending downwards.
The chart of Lowe’s showed negative divergence last month and is approaching a two month low. Once price breaches the monthly demand at $96, the chart suggests price will head down to the monthly demand at $79.
The secular bull market has offered investors/traders lots of opportunities over the last 10 years. The same will be true once the Market turns and heads down in what will be a nasty secular bear market.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
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by rollandthomas
Probably a good call... I would also look at some of the appliance manufacturers... Less home demand, less retail traffic, etc...
Totally agree, I did a post on Whirlpool last week, what are some others that come to mind, so I can research them. As always, appreciate your comments.