Monday, December 10, 2012

Homebuilders - Leaders in trouble?

Homebuilders have had amazing rally all through 2012. They have been pillar of strength for the economy and the markets. XHB has had over 100% gains since October 2011, while some of the indivdual homebuilders like Pulte (PHM) has gained over 500%. Recently, however, they have show some signs of toppiness.  There are multiple ways to play this. Short the index or short the individual stocks.

XHB - Showing bearish divergence. RSI peaked in September and has made lower highs since then. Looks like a good short below Thursday lows of 25.24. You can also go long Ultra short Real Estate ETF (ETF - SRS) which closed at 25.15 today.

PHM - Showing a nice H&S pattern. Also showing Bearish RSI divergence. Has had couple distribution days over last few trading days. Short now or on break of $16.

TOL - Would've been a nice short on earnings gap up last week. It made an high of $34 and since then has been on decline. Likely to hit 200sma and head lower.

BZH - Looks the weakest amongst the lot. Below $14 can head to $12 or lower.

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