A renewed interest in the purchase of homes after a slow summer has pushed investor sentiment to the strongest level in near a year. Investors across the country are looking to take advantage of the strength in the homebuilders and in the article below we’ll take a look at the charts that seem to be benefiting the most from the added momentum. (For more, see: 3 Charts That Suggest Now Is The Time To Invest In Real Estate).
SPDR S&P Homebuilders ETF
A recent pullback in the price of the SPDR S&P Homebuilders ETF (XHB) may be creating the ideal buying opportunity for those looking to trade the strengthening real estate market. As you can see from the chart below, the 200-day moving average (red line) has acted as a significant level of resistance in the past. Based on the chart, it is clear that active traders are expecting the role of the moving average to now act as support since the price is trading above $33.39. Long-term traders will likely look to buy as close to the moving average as possible to take full advantage of the risk/reward setup. Stop-loss orders will likely be set below the swing low of $33.64 or the 200 DMA depending on risk tolerance.
iShares Global Timber & Forestry ETF
Fundamentally speaking, another exchange-traded fund that is poised to benefit from the strengthening home sales is the iShares Global Timber & Forestry ETF (WOOD). As the name suggests, this ETF is used by investors to track the performance of timber and forestry stocks from around the world. Increased demand for lumber has helped support the rally, and as you can see from the chart, the bulls are clearly in control of the momentum. Notice how the 50-day and 200-day moving averages are diverging, which suggests that the upward momentum is gaining strength. Active traders are using the 50-day moving average as a guide for determining the placement of buy orders. From a technical analysis perspective, traders would expect the long-term uptrend to continue until the price closes below the 200-day moving average, which is currently trading at $45.96. (For more on this topic, check out: As Oil Prices Drop, Traders Look To Lumber).
iShares U.S. Real Estate ETF
The last chart that we’ll look at is the iShares U.S. Real Estate ETF (IYR), which was constructed by its managers to provide investors with targeted exposure to domestic real estate stocks and real estate investment trusts (REITs). Taking a look at the chart, you can see that the trend is being controlled by the bulls and that the momentum would be expected to continue until the price closes below the support of the 200-day moving average, which is trading at $76.32. (For more, see: Invest In Real Estate With This ETF).
The Bottom Line
The strengthening sentiment in the U.S. real estate market has many investors looking to determine how to take advantage. In this article, we’ve taken a look at the charts of three funds that look poised to make a move higher, and many will expect the uptrends to continue until the prices close below the identified support levels. (For more, see: Exploring Real Estate Investments).