Book Strength Profits For These 5 Homebuilder Actions

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Actions of home builders DR Horton (DHI), Home Ko

KBH
, Lennar

LEN
, Pulte Group

MPS
 and Toll brothers

TOL
 traded to new cycle highs on May 10. Four of the five are in correction territory at 10% or more of their highs.

Pulte and Toll Brothers maintained their 50-day Simple Moving Averages (SMAs). The others did not. All are above their 200-day simple moving averages. This profile favors a trading strategy to be patient and buy weakness at 200 day SMAs.

Weekly charts are negative for DR Horton, KB Home and Lennar, but all five have their weekly 12x3x3 slow stochastic readings falling below 80.00. Don’t forget this stochastic reading scale of 00.00 to 100.00. Readings above 80.00 are overbought and readings below 20.00 are oversold.

The stock price gains between March 18, 2020 and today range from 232.7% for Pulte to 376.5% for Toll Brothers. This makes the additional rise difficult to maintain.

Housing statistics are stretched

The National Association of Home Builders (NAHB) Housing Market Index (HMI) peaked at an all-time high of 90 (on a scale of 00 to 100) at the end of 2020. The S&P CoreLogic Case-Shiller 20 composite -City for home prices rose 11.1% year-on-year in January 2021.

Home prices are rising faster than the Consumer Price Index due to higher prices for lumber and concrete. It also slows down the construction of new homes.

The graph of the NAHB HMI vs. single-family housing starts

The NAHB Housing Market Index ranges from zero to 100. A reading of 50 is neutral. A reading above 50 indicates a positive reading for home sales. A reading below 50 is a negative reading. The Covid-19 pandemic caused the NAHB housing market index to fall from a record 42 points to 30 in April 2020.

Homeowners living in urban areas have sold their homes to move to the suburbs or more rural areas. The theme is to live in houses with an additional room for an office. Many continued to work from home as the economy recovered from the lockdown. The HMI hit an all-time high of 90 at the end of 2020 on this temporary spike in house construction.

S&P CoreLogic Case-Shiller composite 20 cities

Home prices continue to be in an inflating bubble. The last reading of the S&P CoreLogic Case-Shiller 20-City Composite is at the end of January 2021. The 20-City Composite peaked for the first time in July 2006. The trough occurred in March 2012. The decline totaled 35,. 1%. The current reading for January is 79.4% above the March 2012 low.

Here is a dashboard for the top five home builders.

DR Horton (DHI): ($ 92.58 on June 4) has a negative weekly chart. The stock traded at $ 106.89 on May 10. The monthly, quarterly, semi-annual and annual value levels are respectively $ 89.23, $ 83.25, $ 79.56 and $ 65.40.

KB Home (KBH): ($ 46.00 on June 4) has a negative weekly chart. The stock traded up to $ 52.48 on Mary 10. The monthly, quarterly, semi-annual and annual value levels are $ 44.14, $ 44.22, $ 43.28 and 32.05 respectively. $.

Lennar (LEN): ($ 96.60 on June 4) has a negative weekly chart. The stock traded at $ 110.61 on May 10. A monthly pivot is $ 94.16 with quarterly, semi-annual, and annual value levels of $ 88.75, $ 79.64, and $ 69.51, respectively.

Pulte Group (PHM): ($ 56.95 on June 4) has a neutral weekly chart. The stock traded at $ 63.90 on May 10. The monthly, quarterly, semi-annual, and annual value levels are $ 52.21, $ 51.51, $ 47.47, and $ 40.13, respectively.

Toll Brothers (TOL): ($ 63.28 on June 4) has a neutral weekly chart. The stock traded at $ 68.88 on May 10. The monthly, quarterly, semi-annual and annual value levels are respectively $ 59.68, $ 47.05, $ 47.53 and $ 43.89.