Home Builders Looking Strong

Posted by downtowntrader | 1/08/2010 12:42:00 AM View Comments

Stock Chart Analysis XHB
SPDR S&P Homebuilders (ETF) (Public, NYSE:XHB)

In a move that might be quite surprising to many, the Home Builders appear to have formed a solid bottom on the long term charts, and are starting to move higher. I wrote an article over the weekend highlighting XHB and some individual stocks in the group that were poised to move higher and in that article, I showed a daily chart of XHB, which is an ETF that seeks to replicate as closely as possible, before expenses, the performance of an index derived from the homebuilding segment of a U.S. total market composite index. I wanted to expand on that article and show a weekly chart of XHB, because it gives a better picture of the long term action in this sector.

other symbols highlighted in the article include:
Beazer Homes USA, Inc. (Public, NYSE:BZH)
Lennar Corporation (Public, NYSE:LEN)
Gafisa SA (ADR) (Public, NYSE:GFA)

In looking at the chart, you can see that it was in a very steep decline for the better part of two years. It attempted to bottom during the majority of 2008, but ended up following through to the downside. After setting new lows, it began to consolidate again, basing in the tail end of 2008 and into the first half of 2009. The base took on the shape of a reverse head and shoulders, and XHB was able to clear the pattern in late July. It then consolidated above the base for several weeks, before finally clearing a descending trend line that was firmly in place. XHB has now formed a higher low, and higher high on this chart and appears to be ready to resume moving higher. While everything still looks terrible in the housing markets, its interesting that these stocks quietly acting well. They are definitely worth watching moving forward.

Good Trading,


blog comments powered by Disqus