The XHB(S&P Homebuilders ETF) has remained in a tight range since its powerful Feb. 12th breakout. During this consolidation the index has held a very solid support zone near its 200 day moving average. Following the Fed’s more dovish turn this week the XHB is setting up for a fresh rally leg.
The XHB has been softening up a very heavy resistance zone(summer lows) for the last four weeks.
A clear take out of last week’s high($38.75) would drive the index well past the upper band of the current bull flag.
We are quite positive on the XHB now and regard it as a low risk buy near current levels. On the downside, a close back below this week’s low($37.00) would indicate a more prolonged consolidation will be needed before the XHB can mount a new rally phase.
At time of publication we are long XHB in some managed accounts.