Here’s a look at the homebuilders. Check out $DJUSHB $XHB $LEN and $TOL
This is Dan Fitzpatrick at StockMarketMentor.com with FITZ IN FIVE. I want to look at some of the “homies” today
This ( INDEXDJX: DJUSHB ) has been trending sideways, this is a construction index, with a lot of stuff in there, and this has been trending sideways for almost 2 months. After this big snap hook reversal here it’s given the moving averages a little chance to catch up.
Now, we’re seeing some pretty good strength today, higher volume than it’s been in a while, back to average volume, this is a good thing. I can’t trade the construction index, so then I look at the Homebuilders ( NYSEARCA: XHB ), and I see there’s a kind of positive divergence. This is already broken out from this little squeeze that I was looking at a while ago.
Again, compare the moving averages here, with that, they’re basically the same. This was pushing, again, more towards the 50-day moving average, and then pushing higher. So as a general comment, this is really, really strong. Because it made this big move, drifted sideways, but didn’t even rest long enough for the price to test a really steeply rising 50-day moving average.
I’m looking at some of these stocks, some of them aren’t that great, but others are monsters. Now, we’ve been long Lennar ( NYSE: LEN ) for a while, and I didn’t have a great entry on it. I was actually anticipating a breakout, and we’ll just say, that didn’t work out too well. That was on the 5th of February, I think it was on this day, I just wanted to get in, frankly.
I didn’t have a specific reason right here, right now, to buy the stock, but nevertheless, there it was. The stock traded down and did not get stopped out. And then now, this is finally, after all this time rewarding us and it’s giving us a higher-than-average volume move. So with this now in a bonafide breakout. I think, frankly, you could put your stop, if you wanted to you could reference it below the 50-day moving average.
If you did that, let’s assume it wouldn’t test it tomorrow, let’s assume it might make, maybe, pull back and test it here, which would be in the high 148.00s. Or you could look at this here and go, well, this is the low here, 149.15. So basically, no matter which way you slice it, if you want to be protecting your trade you can keep your stop at one of those two areas.
Now, I noticed Toll Brothers ( NYSE: TOL ) is a little bit different. This had been underperforming Lennar ( NYSE: LEN ) just by virtue of the fact that this was trending lower and Lennar ( NYSE: LEN ) was trending sideways. However, this really pinched today. We got much heavier than average volume. Earnings are on February 20th, so they’re just 8 days away.
It seems to me, with rates where they are and nobody is really looking for them to go up from here, I think these homebuilders are a pretty good trade Either Toll Brothers ( NYSE: TOL ) or Lennar ( NYSE: LEN ) work for me. Whether it will work for you, I don’t know.
We can look at NAIL ( NYSEARCA: NAIL ), it’s a triple bull, that’s 3 bulls running across the field, which could also be a nice move. It’s not a tight pattern but it will track pretty close to that ( INDEXDJX: DJUSHB ).
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