8 Price Points to Watch for Housing Stocks

XHB just strung together its longest weekly win streak since January

by Bernie Schaeffer

Published on Jul 23, 2018 at 3:45 PM

Housing stocks came under scrutiny last week, as investors responded to Wednesday's surprisingly soft data on housing starts and building permits. In fact, it was the biggest miss on housing starts since January 2007 -- just ahead of the subprime mortgage crisis. As such, the shortfalls in June's data sparked a flurry of bleak headlines about the housing market; a quick survey of Google News results on the topic features fairly aggressive language, including "collapsed," "stumbles," "plummets," "plunge," and at least one "meltdown."

Behind the headlines, though, some of the coverage was slightly less panicked. A MarketWatch article packaged as "Housing starts tumble to 9-month low as market headwinds crush momentum" tempered its alarming title by noting (1) the small sample size of government data, which lends itself to frequent and sometimes substantial revisions; (2) "the stop-start rhythm that's characterized the uneven housing recovery," and (3) at least one economist who described June's lackluster data as "more noise than signal."

Against this "noisy" backdrop, the SPDR S&P Homebuilders ETF (XHB) logged a daily decline totaling all of 0.2% by Wednesday's close. And by Friday's closing bell, the exchange-traded fund (ETF) had collected its third positive week in a row to solidify its longest weekly win streak since January.

XHB's resilience in the face of disappointing data and gloomy headlines naturally piqued our contrarian interest, particularly given the fund's hold of key chart support at $39 (which previously marked the June-September 2017 highs) amid net outflows. Since the start of May, investors have pulled more than $65 million out of XHB, but the ETF has repeatedly found a floor near the site of its year-ago highs over this time frame.

In the weeks ahead, here are some of the other significant nearby price points we'll be watching to determine whether XHB, which settled Friday at $41.00, can continue to weather Wall Street's wary outlook on builders:

  • $44.26 = 2017 year-end close
  • $42.48 = 10% correction from Jan. 24, 2018 year-to-date high
  • $41.68 = 160-day moving average
  • $41.43 = 10-month moving average
  • $40.31 = 40-day moving average
  • $39.62 = 80-week moving average
  • $39.83 = -10% year-to-date
  • $39.06 = 50% retracement of November 2016 low to January 2018 high

xhb key levels 0720

Subscribers to Bernie Schaeffer's Chart of the Week received this commentary on Sunday, July 22.

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