Here’s your trade on the homebuilders – March 20, 2023
I want to look at Homebuilders ( NYSEARCA: XHB ) today because nobody else seems to be. In a really crappy environment like this, you wouldn’t expect the home construction industry to do very well. Though I will tell you one thing, as horrible as it might ever do, it is doing a hell of a lot better than the office space. If you are in a commercial read, God help you.
With respect to the Homebuilders ( NYSEARCA: XHB ), the thing that is really interesting, by the way, the XHB has got a lot of things other than homebuilding stocks. When you think about it, the FED is about done raising rates, here’s the tenure. This actually has a lot more control over the FED than the FED has over this, except when it is really flexing your muscles, then it is just a dumb weight lifter, I am talking about the FED not really knowing what it is doing.
But here, with the Treasurys down like this, the yield is starting to come down. You look at something like the Homebuilders ( NYSEARCA: XHB ) and say, Well, shoot man, they should have been down a whole lot worse than they were.
This is Lennar ( NYSE: LEN ). Back in January, I had actually been sending Homebuilders ( NYSEARCA: XHB ) to Jim Cramer for a while. I think I started back in November, maybe it was December, saying, “Dude, I don’t know why but you have got to be looking at the Homebuilders ( NYSEARCA: XHB ) because there actually were crickets”. I didn’t even get a reply, nothing.
And then back in January he asked me if I liked something, would I want to put something on the show? And I am still saying Homebuilders ( NYSEARCA: XHB ), see the previous email, thanks in advance.
And so I put on Lennar ( NYSE: LEN ), here at 95.29, for him. We were in early at a few bucks lower, but I put it on for him here. And after all this time we are still up. The worst that had happened was, we were down just a little bit, not very much to speak of. But now this is still even profitable despite just the absolute filleting that the market has taken with the FED’s actions.
So I was looking at Homebuilders ( NYSEARCA: XHB ) and I see that these things are bouncing right off of the 50-day moving average and I like the action here. So my suggestion is, that you watch this. This could be worth a trade right here, and my suggestion would be that you just keep a tight stop on it. You keep a leash on it that doesn’t allow it to go farther than Wednesday’s low of 63.79, so maybe you put your stop at 63.70 or something like that. That is a really, really tight stop.
I looked at all the different holdings within this and I came up with 2 that look pretty good, and that is Carrier Global ( NYSE: CARR ). It had 4 down days in a row, a big reversal day here on Tuesday and then the rest of the week really, really sucked. But now it is holding the 50. I wouldn’t be buying this tomorrow but you’d definitely want to hold it. It has got some pain that it has to work through on this, but it’s towards the end of March, and summer is coming on. Guess what this company does?
The other one is M.D.C Holdings ( NYSE: MDC ). This is kind of a smaller semi-regional builder. They are holding up really, really nice. You can see that it has kind of made the turn here. So look for this kind of move, and you want to keep your stop just a little bit below the 50-day moving average. That’s the way I would trade it.
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