How To Trade 5 Homebuilders As Sentiment And Housing Starts Stall

Forbes 10 months ago

(Photo by Justin Sullivan/Getty Images)

Homebuilders DR Horton and Pulte Group set new post-election highs last week despite weaker than expected housing data from the National Association of Home Builders and the Census Bureau. All five profiled today remain well below their July 2005 highs.

Meanwhile, Lennar and Toll Brothers have regained upward momentum, while KB Home lags with a negative weekly chart.

Here’s the housing data followed by the weekly charts and trading parameters for the five largest homebuilders.

On Sept. 18, the NAHB reported that their Housing Market Index slipped three points in August to 64. This measure of housing sentiment peaked at 71 in March versus its all-time high of 72 set in June 2005, one month before the homebuilder stocks peaked. Hurricanes Harvey and Irma intensified concerns about the supply of labor and cost of materials.

On Sept. 19, the Census Bureau reported that single-family housing starts, the NAHB benchmark, were reported at a seasonally-adjusted annual pace of 851,000 units in August versus an originally reported 856,000 in July. Single-family starts are up 8.9% year over year. Members estimate that the area damaged by Harvey and Irma covered 14% of the national production. They believe that builders will benefit from rebuilding and restoration projects.

Courtesy of the National Association of Home Builders

The NAHB HMI at 64 in September is shown in blue with the scale at the left side of the graph. Single-family housing starts is in red and is shown on the right side of the graph. This reading is 856,000 for July, which is the level in today’s graph. Note that the HMI is leading the rise in starts by a significant margin, which should be considered a warning. When the index was 72 in June 2005, single-family starts were approaching 1.8 million units, not struggling at more than half that pace.

Global Market Consultants

D.R. Horton (DHI) ($37.57 on Sept. 19) is in bull market territory, 40.8% above its Nov. 9 low of $26.69, and set its multiyear intraday high of $37.78 on Sept. 19. The stock is 12.3% below its July 2005 peak of $42.82.

Courtesy of MetaStock Xenith

The weekly chart is positive with the stock above its five-week modified moving average of $36.41. The 12x3x3 weekly slow stochastic reading is projected to rise to 75.74 this week up from 71.96 on Sept. 15.

Investment Strategies: Sell strength to my monthly risky level of $40.08. My annual pivot is $35.04. Buy weakness to my semiannual value level of $30.48.

KB Home (KBH) ($21.28 on Sept. 19) is in bull market territory, 49.5% above its Nov. 8 low of $14.17, and set its multiyear intraday high of $24.37 on July 12. The stock is 75.2% below its July 2005 peak of $85.45. KB Home is also in correction territory, 13.1% below its July 12 high.

Courtesy of MetaStock Xenith

Richard Suttmeier, a former Treasury bond trader, has 45 years experience in the financial markets. He's an engineer by education with a master of science degree.

Source link
Read also:
Forbes 10 months ago
Efforts undertaken by the U.S. and Chinese governments in the name of cybersecurity have become some of the most serious sources of trade policy...
The Sun 10 months ago
THERESA May embraced her host Justin Trudeau as she arrived in Canada to help get a post-Brexit trade deal this afternoon. The Prime Minister thanked...
Forbes Finance 10 months ago
Forcing Fannie Mae and Freddie Mac into another bailout is an irresponsible game of chance. Last month, Mel Watt, director of the Federal Housing...
Bloomberg Finance 10 months ago
Chinas economic model represents an unprecedented threat to the world trading system that cant be addressed under current global rules, President...
CTV News 10 months ago
OTTAWA - Prime Minister Justin Trudeau and British Prime Minister Theresa May are meeting on Parliament Hill as she makes her first visit to Canada...
Forbes 10 months ago
Housing starts forecast 2018-2019 Drivers of demand growth are population, changes in household size, and pent-up demand. Population growth is the...
Reuters Finance 10 months ago
WASHINGTON (Reuters) - U.S. homebuilding fell for a second straight month in August as a rebound in the construction of single-family houses was...
Forbes 10 months ago
(AP Photo/Jeff Roberson, File) Housing starts in August came in at a seasonally adjusted annual rate of 1.18 million. Starts slid 0.8% from a revised...
Miami Herald Finance 10 months ago
Homebuilders slowed their pace of construction by 0.8 percent in August, the second straight monthly decline. The Commerce Department says housing...
One click to connect
Select a social network to associate your account