Taylor Wimpey Share Price is Collapsing. Should You Buy the Dip?

Summary:
• Taylor Wimpey share price crashed by more than 5% on Thursday as concerns about the housing sector continued.

Taylor Wimpey share price crashed by more than 5% on Thursday as concerns about the housing sector continued. TW stock crashed to a low of 80.68p, which was the lowest level since March 2013. It has tumbled by more than 67% from its highest level in 2021. Shares of other companies like Persimmon and Barratt Development have all crashed as well.

Housing market challenges

Taylor Wimpey is a leading UK housebuilder that builds and sells thousands of homes per year. The company did well during the pandemic as the UK announced a series of interventions to support the economy. One of the interventions that the country made was the removal of stamp duty. This was also supported by low-interest rates by the Bank of England.

Recently, however, the situation has changed as inflation soared and interest rates rose. Analysts expect that the Bank of England (BoE) will likely deliver a 100 basis point rate hike before its official date in October.

Taylor Wimpey share price crashed after Barratt Development published weak earnings and guidance. Barratt, which is the biggest housebuilder in the UK, said that the sector was slowing dramatically. For example, the company averaged about 188 homes per week compared to 281 in the previous period. 

The firm published adjusted pre-tax profits of 972 million pounds for the full year, which was lower than the 1.05 billion pounds that it recorded in the previous year. Therefore, analysts expect that the company’s growth will continue slowing down in the coming days.

Taylor Wimpey share price forecast

The daily chart shows that the TW share price has been in a strong bearish trend in the past few months. This sell-off continued when the stock moved below the important support at 110.56p, which was the lowest level on July 11. It has fallen below all moving averages while the Relative Strength Index (RSI) has continued falling.  The MACD is below the neutral level.

Therefore, the stock will likely continue falling as sellers target the next key support level at 75p. A move above the resistance at 88p will invalidate the bearish view.