Sector Spotlight: Homebuilders

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Tickers discussed: DJUSHB ITB BZH DHI HOV KBH LEN MDC PHM TOL

The Sector Spotlight today features homebuilders and provides a comprehensive technical look at the key stocks in the group. Key levels and trading locations are provided, along with trading plans and timely commentary to keep you on the right side of the trade.

Companion Video

The companion video covers  the discussion of all the charts in the homebuilder group with added color on trading opportunities.

Find the Video HERE

Executive Summary

  • Homebuilders have had a stellar run off the March lows, but have recently rolled over
  • Many names put in divergent highs marked by recent tops in price but at lower highs in RSI and low Momentum
  • Homebuilders are no longer outperforming SPY see chart below

  • As a group, as shown by the $DJUSHB, is at support as marked by the February high. A break below this level would target the 200ema
  • Notice that RSI has broken trend and is below 50 and the PPO is going bearish below the zero line.
  • Bottom line: The group needs to hold right here or it goes lower. 

Homebuilder Charts

$ITB – Homebuilder ETF

Price is in no man’s land and thus offers no immediate trading opp.  The indicators and price position favors a move to $50 that will need to hold or $44 would be targeted as the next downside target.

$BZH – Beazer

Beazer has underperformed the group and thus has not fallen as much as others and is still holding trend. A break of trend would put it on the wrong side of the chart and would favor a move to the 200ema at 11.50.

$DHI – DR Horton

Rolling out of a divergent high like most in the group. $67.50 has to hold or here comes the 200ema at $61. Key stock within the group and a leader so how it goes from here will count for a lot. If you’re a bull you can be long with a stop just below $67.50 but the posture of the indicators are very weak.

$HOV – Hovarian

Price has broken trend but holding in ok. $31 is the key level. Lots of air below to the 200ema at $25 if it breaks. If $32 holds the stock is in better technical shape than most. If it recaptures the uptrend line it will bode well for the upside.

$KBH – KB Homes

Simple set up. $32 has to hold or its over. Price would have lost the 200ema and key support. If $32 fails its a dead short. If its going to hold it will hold right here.

 $LEN – Lennar

Price is sitting at key support at $70. As long as it holds it is fine but a break below favors lower prices. Don’t like the short here. Lots of intermediate support levels that will slow any drop. Looks like a tougher short than others in the group. As a group leader, you’d expect a turn around to be seen here. Be on the lookout for a potential long here with a stop just below $70. Support is support until / unless broken.

$MDC – MDC Homes

Poor technical posture with price below all ema’s and support at $44. In addition notice the price void. Free shot at the 200ema and possibly $36 key support. Traders should lean short unless / until $44 is recaptured. Any green day that takes price close to $44 offers a tight short set up with a stop just above. Any break and hold above $44.50 kills the short ideas near term.

$PHM – Pulte

Both RSI and PPO are in bear mode. Price is below all the fast ema’s and below support at $43.  If price kicked back to $43 it would be an objective short with a stop just above. Favor a move to either tag the 200ema at $39.50 or find key support at $38.50. Any break of $38.50 sends price quickly to $33. On the bull side if price can reclaim $43, it would be bullish and would trigger an objective long w/ a tight stop below.

$TOL – Toll Bros

Similar set up to OHM with price below all the fast ema’s. Price needs $46 to take the immediate pressure off. That said technically speaking a move to the 200ema and key support at $39 is favored. A kick back to $46 that gets rejected would offer a tight short set up. Reclaiming $46 would trigger an objective long entry. Notice the bearish posture of the indicators

 

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