【CNBC】Housing stocks look sound, but trader warns of weaknesses starting to form

Housing stocks are standing on shaky ground.

That’s according to Matt Maley, equity strategist at Miller Tabak, who says that while the group looks great fundamentally, some weaknesses are beginning to form.

“I’ve been bullish on this group for two years now,” Maley told CNBC’s “Trading Nation” on Wednesday.
“But sometimes the stocks do a little bit differently than what they should do or what the underlying fundamentals tell us they should do.”

Housing stocks managed to finish mostly higher on Wednesday, despite demand for mortgage applications falling to its lowest level in six months. The group was held up by D.R. Horton which climbed nearly 3% after Susquehanna raised its rating to buy. On the company’s earnings call Tuesday, CEO David Auld said the housing market “is the best I’ve ever seen.”

However, Maley points to some technical weakness brewing for the group.

“Right now, we’re seeing some cracks in this group. You look at a chart of the ITB, the home construction ETF. It’s already broken below its trend line going back to March, so that’s negative. And now it’s getting close to testing a key support level, the neck line of a head-and-shoulders pattern. So in other words, if it makes another lower low after dropping below that trend line, it’s going to be a negative signal for the group, and raise a red flag.”

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