Housing sector has had an excellent week but may be impacted by the words of our esteemed fed chair when speaking at the Jackson Hole symposium (9.10am kick off). A move over $31.75 would also represent a break of the 200MA. Bough call potential
SPDR S&P Homebuilders have started to roll lower. MACD already negative and we are below MA65 and MA89. RSI also looks bearish.
I wrote back on 5/4 on my blog that "I'm standing by XHB" that I thought the negativity around housing was excessive and higher prices would eventually come our way. Some of the "smart" money on Wall Street was decisively negative. Among the stories predicting the fall in stock prices of the home builders included this one from Friday the 23rd. Big investors...
The extreme divergence between housing and $SPY recently is either a sign that housing with explode higher to catch up soon or that the S&P will sink to fall in line with housing. You decide.
Failure. $ITB $IYR $LEN $RYL $PHM $TOL $DHI
We could see it retest the $32-$33 area before fully reversing. But a Bearish Butterfly that finished at a 61.8% of the entire chart is a good bet to place on the downside. On a fundamental side, if interest rates rise we will see these guys get hit hard.
I have bought Dec. $31/$30 Strangle. I will look to add size next week if I can get better entries. This should be enough time for price to decide and confirm a direction. i am not sure of long/short but I am sure volatility should increase in either direction.
If it breaks ~26.91 it should go to the downside. If it breaks above 30 then it could retest old high. My personal prediction: it tests August 2012 support line.
H&S? Short below $30 (Stop: daily close above $31.10). Target 1 around $25 in the medium term. Tapering should hurt homebuilders most. But if, price rebounds from here we might actually see a bullish reversal, H&S negation and then target would be atleast $34 (76.4 fib from all-time highs)
XHB has been trading inside a channel since last September. Long term uptrend line from the latter part of 2011 remains support. However, under both 20 and 50 SMA, and price is hovering around trendline.