Taylor Wimpey Share Price Has Collapsed. It’s Not Done Yet

The Taylor Wimpey share price is in trouble. The TW share price is trading at 147p, which is about 18% below the highest point in September. It dropped to the lowest level since July 19th. It is also one of the few FTSE 100 companies that are in the red today.

UK home prices strength

Interestingly, the Taylor Wimpey share price is struggling at a time when UK home prices are surging. Data published by Halifax showed that the country’s home prices rose from 0.7% in August to 1.7% in September.

On a year-on-year basis, the prices have risen from 7.2% to 7.4%, which is the fastest growth since 2007. On average, the price of a home has jumped to more than 267k pounds. This trend will benefit companies like Taylor Wimpey that benefit when prices are rising.

Indeed, the most recent report showed that the company was doing well because of the rising home prices. The firm delivered a record first-half results and a strong operating margin. It completed 7,303 homes in the first half of the year, higher than the 2,771 that it completed in the first half of 2020. Its margins expanded to 19.3% while its net cash was about 905 million pounds.

Therefore, the TW share price is likely dropping because analysts expect that the housing industry will start slowing in the coming months. Also, with home prices surging, there is a likelihood that the bubble will burst if the Bank of England (BOE) starts hiking interest rates. Analysts expect that the bank will start tightening in the first quarter of 2020.

Another reason why the stock is falling is that some analysts expect that its margins will thin as the cost of doing business rises.

Taylor Wimpey share price forecast

The daily chart shows that the TW share price formed a double-top pattern recently. The price is currently at the chin of this pattern. In price action analysis, this pattern is usually a bearish sign. At the same time, the stock has dropped below the 25-day and 50-day moving averages. It is also slightly above the important 38.2% Fibonacci retracement level. 

Therefore, I suspect that the stock will soon break out lower, with the next key support being at the 23.6% retracement at 124p. This price is about 14% below the current level. On the flip side, a move above 160p will invalidate the bearish view.

Taylor Wimpey Share price