Exercise Caution on This Upgraded Housing Stock

KBH is higher on an analyst nod, but is flashing a bearish technical signal

Apr 10, 2019 at 11:26 AM
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The shares of homebuilder KB Home (NYSE:KBH) are higher today, thanks to some upbeat analyst attention. Specifically, J.P. Morgan Securities upgraded KBH to "neutral" from "underperform," and lifted its price target on the stock to $23 from $20.50, citing "a more stable demand backdrop following the continued decline of rates." However, KBH stock is flashing a historically bearish technical signal right now, suggesting traders may want to exercise caution.

KB Home shares were last seen 1.2% higher at $24.97. The stock has chugged 48% higher since its mid-November low of $16.82, but is now within one standard deviation of its 320-day moving average, after a lengthy stretch below the trendline. In the past three years, there were two similar run-ups to this moving average, after which KBH was lower one month later both times, averaging a steep loss of nearly 19%, per data from Schaeffer's Senior Quantitative Analyst Rocky White. Another drop of this magnitude would put KBH around $20.22.

KBH stock chart april 10

Most analysts remain skeptical of the homebuilder. Currently, KBH boasts just three "strong buy" ratings, compared to nine tepid "holds" and one "strong sell." Plus, the consensus 12-month price target of $25 is in line with the equity's current price.

In the same vein, options buyers have picked up bearish bets at a faster-than-usual pace during the past two weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 1.54 is in the 78th percentile of its annual range.


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