The recent drop in rates has given the home construction sector quite a boost. The XHB(S&P Homebuilders Index) is beginning to break free of a month long consolidation pattern(Bull Flag). The 200 day moving average has held of the lows of this orderly pullback and as the week comes to a close the 50D will trace out a bull cross.
A key hurdle in the near term is the March high($39.05). A clear take out of this level could spark quite a run. On the downside, a close back below $37.60 would violate this week’s low signally more consolidation is on the way.
Top six weightings in the XHB: A.O. Smith(AOS), Lowe’s(LOW), Owens Corning(OC), Johnson Controls(JCI), Home Depot(HD), Toll Brothers(TOL).
At time of publication we are long HD, LOW and TOL in some managed accounts.