A red-hot homebuilder stock just flashed a warning sign for investors, according to Ritholtz Wealth Management CEO Josh Brown. D.R. Horton blew away expectations for its fiscal third quarter Thursday morning, reporting $3.90 in earnings per share on $9.73 billion of revenue. Analysts surveyed by Refinitiv were expecting $2.79 per share and $8.39 billion of revenue. Investors cheered the news, but not for long. The stock rose sharply at the open and set a new all-time high at $132.30, but then quickly reversed course and fell into the red for the day. DHI 1D mountain D.R. Horton stock reversed course during Thursday’s session. Brown said the reversal appears to be a sign D.R. Horton’s momentum is running out of steam rather than any negative surprise buried in the report. “I can’t find an actual reason. When people use the term ‘blow-off top,’ this is exactly what they are referring to. I don’t like when stocks go parabolic, and then reverse and close out the day negative. That’s really dangerous price action,” Brown said on CNBC’s ” Halftime Report. ” Shares of D.R. Horton are up about 40% for the year. Though the rapid rise in interest rates has hurt the real estate market, homebuilders have been reporting strong results in part because existing home sales have slowed to a trickle. The SPDR S & P Homebuilders ETF (XHB) has jumped more than 30% year to date. XHB YTD mountain Homebuilder stocks and ETFs have outperformed the broader market this year. That run may have changed the shareholder base for stocks such as D.R. Horton, which could make them unpredictable going forward, Brown said. “When you get a lot of momentum money in a name, you can have a blow-off top like this, a reversal like this. I think you’ve got to be careful until it cools off. I wouldn’t knee-jerk be buying into this here just because it’s down,” Brown said.
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