Want to get away from this volatility? Stay at home! Here is a look at the Homebuilding ETF (XHB) and a few components that work. (July 22, 2015)
I want to look where nobody else, at least in the financial media, is looking today, for reasons that are pretty obvious, because all the attention, all the action, all the news is elsewhere. I think the Homebuilders ( NYSEARCA:XHB ) are setting up really, really nicely. If you can’t decide which stock to buy, which is fine, that’s why they make ETF’s, you can take the XHB ( NYSEARCA:XHB ).
I noticed one person in the forum today was saying, “Hey, it’s getting close but its not quite past Dan’s buy point.” I think that was just a little bit above this high of 37.78; there was a price alert set on that. Here’s the thing on the daily chart, I want to give this to everybody not just members but everybody on our “Free Chart” list because I want everybody making money and I think this is going to be a money maker here.
Here’s the breakout level here, the fact that the market has been drifting sideways but really, really volatile. The last couple days the S&P’s lower, the fact that that was happening yet the Homebuilders ( NYSEARCA:XHB ) now are starting to move higher. They haven’t been as volatile, not as volatile at all, this I think is a high base ready to move higher. So you can be buying this on any kind of a breakout here, I prefer the closer to the 50-day moving average this is the better.
Look at Home Depot ( NYSE:HD ). I think I mentioned last week, where I thought this is giving you a buying opportunity, and it is. Lowe’s ( NYSE:LOW ) isn’t really working, not like Home Depot ( NYSE:HD ), though ultimately that could move, but this is anticipation here, we want to see this trade back above the 50-day moving average. But for Home Depot ( NYSE:HD ) you can see the difference, the stock’s actually traded above the 50-day moving average enough to where we’re now finally trending upwards again. Well, we’re not but Home Depot ( NYSE:HD ) is, so I think this works.
Mohawk ( NYSE:MHK ), from one of our esteemed members, debeers, in the forum, this is a boring stock, it’ll bore you to tears, the dividend is awesome, zero, just bore you to tears, unless you just like making money. The stock works, it’s absolutely not a trading stock; it’s a holding stock in this real estate homebuilding industry. Lets look at a couple of these, Beazer ( NYSE:BZH ), not very liquid at all, small home builder, but you can see the volatility squeeze, a breakout and then a pullback right to the 50-day moving average.
So you’re buying here and then you’re keeping a fairly tight stop, you can see the zigzag pattern here. This is not a momentum stock; this is a trading stock. KB Home ( NYSE:KBH ) is giving us a similar deal here. There’s a lot of pain here in this chart coming down, but you can see the bounce, so this is really working. Toll Brothers ( NYSE:TOL ), they report earnings on August 18th, so we’ve got just about a month here, right? This is a sideways consolidation, a bounce off the 50-day moving average.
Finally, D.R. Horton ( NYSE:DHI ) is also giving you some sideways consolidation, a pullback to this 50-day moving average. Out of all of these, frankly, I think the XHB ( NYSEARCA:XHB ) is maybe not the most bang for the buck as far as magnitude of a move, because it’s an average, they’ve got a boatload of stocks in them. Well I don’t know about a boatload, but they have 36 of them, 36 holdings in this ETF. So knock yourself out with Whirlpool ( NYSE:WHR ), all of these, Owens Corning ( NYSE:OC ) works, Whirlpool ( NYSE:WHR ) doesn’t. We can go down the list here, Ryland ( NYSE:RYL ) works, M/I Homes ( NYSE:MHO ).
So we can go on this way, but what I’m saying is you go ahead and buy the XHB ( NYSEARCA:XHB ) and you are good to go, you’ve got all of them. There are a couple of the homebuilders that I mentioned specifically, those could also work. But what I’m telling you is this, Semi’s ( NYSEARCA:SMH ) are really not working, it’s not where you want to be, these are under performing. Homebuilders are performing; and of course biotech (NASDAQ:IBB ). Need I say more?
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