What the Charts Say
The chart below is of the iShares Home Construction ETF (ITB) and has been a focus of ours during this housing top. Shown in the chart over the last month ITB has not been able to breach $25.
This is a key resistance zone that has provided sellers. Notice too that ITB topped back in May 2013 along with most housing related equities. Buyers have once again run into the $25 resistance which also again is rejecting prices. If prices are finally able to break above $25, it will be a short term buy signal, but no doubt there will be sellers waiting up at the $26 area.
None of this hasn’t prevented short term traders from profiting on the long side. Our Technical Forecast readers were provided analysis on 1/26 explaining why they could buy ITB at $23.50 for a short term trade up to $25. Five days later ITB was up 6% to that important $25 level, where they took profits.
Where to Next?
Lumber prices have rebounded somewhat since their springtime selloff, but thus far have not been able to make new price highs. Their prices also look to be at risk of another significant price decline. If that occurs, it will be another big warning for the housing sector.
In addition, yields are expected to continue higher over the longer term, which will also no doubt keep pressure on the traditional home buyer and house prices.
I am watching a few key support levels on ETFs such as ITB, XHB, and TLT to warn of the next significant decline in housing related stocks.
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