Shares of Toll Brothers (NYSE:TOL) are in trouble. The technical chart has one of the most powerful bear-flag formations I have seen in the last year and the house builder is looking at a major breakdown. The next wave of selling will be more powerful than the first, likely taking the stock as low as $40 before investors start nibbling.
The Fundamental Reason
With the new tax plan in effect, home prices in many higher net worth states like California, New York and New Jersey will be drop an estimated 10% or more. In addition, buyers in these higher-end home states may think twice about buying, maybe even deciding to move to lower state income-tax states. It's naive for investors to think that high-end home builders will not see an effect from this new tax plan, which kills off the SALT deduction.