This Red-Hot Housing Stock Could Cool Off, If History Repeats

Of the exchange-traded funds (ETFs) that we track, the iShares U.S. Home Construction ETF (ITB) currently sports one of the biggest year-over-year returns, up more than 53%. And that's even after housing stocks last week got slammed in the wake of House Republicans' tax plan. However, one homebuilder stock could take a breather soon, if history is any guide: D. R. Horton Inc (NYSE:DHI), which reports earnings tomorrow. Below, we'll take a look at DHI stock ahead of earnings.

D. R. Horton stock has added a sector-beating 63% over the past year, and recently broke north of its channel of higher highs and lows, topping its pre-financial crisis peaks. In fact, DHI stock just moments ago notched an all-time high of $45.54, and was last seen trading at $45.45, up 1.1% on the day.

However, the stock's 14-day Relative Strength Index (RSI) now sits north of 80 -- well into overbought territory, suggesting a pullback could be in the short-term cards. Plus, the security fell in the session after its last two earnings reports, and has dropped after four of its last five quarterly releases. Over the past eight quarters, DHI stock has averaged a one-day post-earnings move of 3.9%, regardless of direction. This time around, the options market is pricing in a bigger-than-usual swing of 6.1%, per D. R. Horton stock's at-the-money (ATM) implied volatility (IV) data.

In the same vein, DHI stock is among the top 20 S&P 500 Index (SPX) stocks with the biggest discrepancies between May-through-October returns and November-through-April returns. While the shares have averaged a May-October gain of 1.23% since 2010, they have averaged a November-April loss of 3.51%, according to data from Schaeffer's Senior Quantitative Analyst Rocky White. This, even as the broader stock market tends to outperform in this six-month period.

Analysts and options buyers aren't too concerned. Ten out of 16 brokerage firms deem DHI stock a "buy" or better, and the equity's 50-day call put/volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is a lofty 5.82. In other words, traders have bought to open nearly six D. R. Horton call options for every put option in the past 10 weeks. A weaker-than-expected earnings report tomorrow could leave DHI vulnerable to downgrades or an unwinding of optimism among options traders.