Stock Trends

Yo homes, smell ya later?

Good morning,

Today we’re doing a mini deep dive on the homebuilders. As this week’s Monday Morning Playbook showed, the group has been consolidating in a tight range just above the 2021 highs. Overall, the trends are strong but if you’re going to add these stocks to your portfolio now (like Warren Buffett is doing) you’ll need the breakouts to hold. There are a couple of warning signs that bear watching and from a macro perspective, after seeing the false breakouts in tech, we wouldn’t want to see them in a bunch of leading cyclical stocks too.

This week we’ll review key levels for some of the most notable homebuilders as well as:

• Homebuilding beneficiaries

• The Big 3 in tech

• Regional banks failing at key spots

• The 4 stocks in the SPX that made a 52-week high yesterday

• and more!

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Yo homes, smell ya later?

Nobody has been stronger than PulteGroup

No homebuilder has been stronger than PulteGroup, which is up 91% over the past year. That’s why the inability to break through $86, with multiple lower highs in momentum should be cause for concern. The weekly chart also has problems, on the verge of a weekly MACD cross in overbought territory. You can see that signal hasn’t been kind to PHM over the past few years (chart below).

PHM (weekly)

TOL on verge of bullish MACD cross

PHM may show some near-term concerns, but it is hard to be too negative on the TOL chart right now. The stock is on the verge of a bullish MACD cross, is above the breakout point of $75 and still riding the 50-DMA. A move to $84 is bullish, while we would need to see $75 give way to really turn negative.

NVR not seeing much buying action recently

I don’t show volume much, but there has been a clear decline in activity in NVR since the breakout above $6000 in June. Throw in an ugly reversal from 52-week highs last month and you’ve got a stock with a good bit to prove here.

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Homebuilding beneficiaries

Vulcan Materials benefitting

VMC may be in the materials sector vs. the industrials, but the chart looks the same as others here. If we’re above $212 it is hard to bet against the stock, but that RSI momentum divergence bears watching.

Sherwin-Williams setting up nicely here

It needs to clear $285 for the true breakout, but SHW is setting up nicely here with a rounding bottom after filing its recent gap. The recent swing low of $269 is a nice stop for shorter-term traders and the leadership profile fits with long-term time horizons.

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The Big Tech 3 revisited