Dwelling Depot shares have been on a terrific run, however the firm’s latest underperformance is changing into extra pronounced.
The inventory was on hearth. It rallied onerous following the U.S. election in 2016, and final 12 months rose 41 p.c for its greatest 12 months since 2012.
Nevertheless, the inventory has been underperforming fairly badly because the broad market topped out in late January.
Though the broad indices have bounced strongly from the lows earlier this 12 months, Dwelling Depot has really fallen beneath its February closing lows and nonetheless stands in correction territory, off 14 p.c from its 52-week excessive.
We would additionally notice that because the starting of March, Dwelling Depot is down 2 p.c whereas the ITB house development exchange-traded fund has rallied 6 p.c in the identical time.
In different phrases, Dwelling Depot just isn’t solely underperforming the broad inventory market, however is all of a sudden underperforming the group with which it is usually extremely correlated.
I do not need to overstate the importance of its latest underperformance — no less than, not but. Dwelling Depot continues to be buying and selling effectively above its 200-day shifting common, effectively above its development from the 2016 election, so the latest motion just isn’t a catastrophe.
Nevertheless, if its underperformance continues, it may actually increase a yellow warning flag on this inventory after a wonderful run.