On CNBC's "Trading Nation," Quint Tatro of Joule Financial said a decline in the homebuilding space makes perfect sense.
Home Depot Inc HD and Lowe's Companies Inc LOW were at a peak during the COVID-19 situation and stimulus checks and now they're not able to hit the numbers as we reopen. In addition, input prices soared to levels not seen in decades, putting the breaks for anyone looking to build, said Tatro.
Now that the input prices are coming off, he expects the homebuilding sector to improve over the next couple of quarters. This creates an opportunity to add to stocks that are attractive from a valuation perspective. He would be a buyer of KB Home KBH and PulteGroup, Inc. PHM.
JC O'Hara of MKM Partners noticed a double top technical pattern in the chart of SPDR S&P Homebuilders ETF XHB. This pattern indicates bulls stopped buying and bears took over. O'Hara wouldn't be surprised if we saw continued lower prices in XHB over the next few days or weeks.
He expects the buyers to step in at the 50-day moving average as they have done historically. He is neutral on the setup, but it would become more attractive at $73, which is the value of the rising 50-day moving average.
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