The homebuilders segment of the S&P Total Market Index comprises sub-industries such as homebuilding, home products, home furnishings, home improvement retail, and household appliances. Unsurprisingly, demand for products from across these sub-industries has been surging for months as people around the world spend more time at home. In this article, we consider several charts from across the homebuilders sector and try to determine how active traders will be looking to position themselves over the weeks and months ahead.
- Nearby support from key trendlines and long-term moving averages suggests that the homebuilders sector is well positioned to make a move higher.
- Top holdings of the SPDR S&P Homebuilders ETF (XHB) could be of specific interest to active traders over the weeks ahead because they have recently moved beyond the resistance of influential trendlines.
SPDR S&P Homebuilders (XHB)
Active traders who are interested in specific sectors such as homeubilders often turn to exchange-traded products such as the SPDR S&P Homebuilders ETF. Fundamentally, the fund consists of 35 holdings from across the U.S homebuilders sector with a weighted average market capitalization of $30.5 billion. The fund is popular with active traders for gaining exposure to the sub-industries mentioned above and has total net assets of approximately $1.5 billion.
Looking at the chart below, you will notice that the dotted trendlines have provided clear guides for active traders when looking for where to place buy and stop orders. The recent break beyond $60 and subsequent retest of the new-found support suggest that the bulls are in control of the momentum and that the next leg higher could just be getting underway. From a risk-management perspective, stop-loss orders will most likely be set below the dotted trendlines or the 200-day moving average ($51.85), depending on risk tolerance and outlook.
Lennar Corporation (LEN)
As one of the top holding of the XHB ETF, Lennar Corporation (LEN) will likely capture the attention of active traders over the weeks ahead. Looking at the chart below, you can see that the price of the stock has been consolidating near the 200-day moving average. The validation of the nearby support, as shown by the horizontal price action near the 200-day moving average, suggests that this level will continue to influence the price over the weeks ahead and could be used in determining the placement of stop-loss orders.
The recent break beyond all the dotted trendlines has also triggered an upward shift in the 200-day moving average. From an active trader's perspective, the shift in the long-term moving average is significant because it suggests that a longer-term uptrend could just be getting underway.
Williams-Sonoma, Inc. (WSM)
Another top holding of the XHB ETF that could capture the attention of traders over the weeks ahead is Williams-Sonoma, Inc. (WSM). Looking at the chart below, you can see that stock has been steadily marching higher since recovering from the lows last March. The dotted trendline shown on the chart has played an influential role in the rise, and many active traders will take note of it because it will likely continue to affect the price over the coming weeks and months.
Near record-low interest rates and people evaluating their living situation during the pandemic have worked together to underpin strong demand.
The Bottom Line
The homebuilders sector and its sub-industries such as homebuilding, home products, home furnishings, and home improvement retail have seen soaring demand for quite a few months now, and this trend will likely continue throughout 2021. Based on the chart patterns discussed above, it appears that companies within the sector are trading near major levels of support and are well positioned to make a move higher.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.