Homebuilders have acted well technically as of late, and while some still are waiting in the gates to rally higher, others have already staged wonderful breakouts that look to have further to go.
Typically during times of turmoil in the markets, homebuilders are quick to duck their head and slip lower; however, things can be different during earnings season, when correlations can break down (at least in the near term).
Homebuilders on the Move: D.R. Horton (DHI) & PulteGroup (PHM)
On Tuesday, D.R. Horton (DHI) reported first-quarter earnings that beat the Street’s estimates on both the top and bottom lines. D.R. Horton’s earnings came in a whopping 80% higher year-over-year, and DHI was rewarded with a nearly 10% bounce on the day that also left a positive mark behind on its charts. Since then, DHI stock showed marginal follow-through buying and looks to still have higher prices to test.
Through a technical lens, DHI stock on Tuesday broke out of a textbook bull flag pattern after holding its 50-day (yellow) and 200-day (red) simple moving averages, which now opens the way for 5% to 10% more in gains for the time being.
This morning before the start of trading, another mainstay among the homebuilders — PulteGroup (PHM) — reported its fourth-quarter results. PulteGroup’s earnings per share came to 57 cents, which was 68% higher on a year-over-year basis and beat expectations of 44 cents by nearly 30%. However, revenues came in a little lighter than the Street forecast, with $1.66 billion coming in shy of $1.68 billion. Year-over-year, though, sales still were 6% higher.
The daily chart of PHM stock looks eerily similar to that of DHI above as it is about to break out of its bull flag formation after holding the 50- and 200-day MAs. With bullish setups like these among the homebuilders, momentum is favorable to the upside in the near-term.
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Learn more about the strategies Serge Berger uses to create profits in the market every day. Download his trading plan in the Essence of Swing Trading e-book by clicking here. As of this writing, he did not hold a position in any of the aforementioned securities.