As the overall market attempts to put in another higher low and eventually firm up enough individual charts to sustain a multi-week/month rally, patience has been the toughest skill to master. During this tedious attempted stabilization process, we can and do look for clues of accumulation, or large institutions layering into stocks they believe are bargains, in order to gauge potential leaders of the next leg higher.
Until recently, the housing sector and housing-related stocks had more or less been left for dead in recent years, understandably so with the sharp decline in home prices and home ownership. However, when you look at lumber firm WY, as well as roofing play BECN, and window/door/glass-maker NX, the bottom portion of my charts tell a story worth watching unfold. Note the volume patterns on their respective daily charts below. It does not mean that they will double in price starting tomorrow, or that you should go out and buy these stocks tomorrow looking for immediate upside.
What it does likely mean, though, is that the process of large market players accumulating these stocks has more than begun and the firms should be watched very closely going forward. If the broad market cannot sustain another leg higher this summer, these stocks probably just build a larger technical base going sideways, serving as a coiled spring.
However, on the slightest technical improvement in the broad market, such as the 50 day moving average on the senior indices starting to turn up, I expect these stocks to be out in front with strong underlying bids to not only support them but propel them much higher.
A big hat tip to 12631 member “Earl” for pointing out BECN and NX in our chat room.