I believe it was Cubs Rock that asked me to put up a chart and give an opinion on [[XHB]].
Since January, theÂ etf has spent more time overbought than oversold. The 50 day average has turned up and is tracking to cross back above the 200 day average. A new uptrend has begun, evidenced by the higher highs and higher lows. AÂ close beneath $18.00 would break this trend.
In the near term, XHB has pulled back from an overbought condition. Volume on the pullback has been large. Support in the area of $20.00 is probable. If one is considering a position, I suggest waiting until the RSI(2) becomes oversold before buying. This could happen within a day or two.Â
Personally, I find this chart compelling. I do not know fundamentally why one would buy the homies here, as I do not think the industry will fully recover for several years or more. However, the technicals show a recovery in process. This could very well be due to short covering and speculation.
I’m very curious as to how the homeys will play out in regard to what’s apparent in the real world. From what I cab see, inventory is still rising & is probably at all time highs, yet homey equities bottomed in early January. If the predictive quality of stocks holds to form, inventory on the ground should begin to reverse sometime this summer. If not, I’d expect the stocks to probe their lows again.
If unemployment is gonna be trending up, the bottoming process could take a long while to play out.
Thanks Wood, I appreciate you taking your time looking at it.
I think everyone wants in because they think they can catch a double or something close. Also, the downside risk seems very low vs the upside potential in the long term.
As of today I’m short the Home Builder KBH. I think the short side play of Homies is just about over.
If anything, homebuilder fundamentals have deteriorated. If you look at the chart, the 3 recent spikes correspond to the 3 big Fed moves, the .75 / bank deal / .75. Each time, prices have dropped back down after. I don’t know if the Fed has anything left up it’s sleeve, but I think once it realizes it has to stop because its done enough damage to the dollar and added enough fuel for inflation, then the homebuilders will have no choice but to plummet to ignominious deaths.
I’ve been short homebuilders for about a year and have been adding. I recently shorted the ITB homebuilding index.
I didn’t know you wrote this article as I wrote abut XHB last night. Odd, no?
We both drew bullish conclusions from it. Odder yet.