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I have been handicapping five homebuilder stocks for quite some time and D.R. Horton Inc.  (DHI) , KB Home (KBH) , Lennar Corp (LEN) , PulteGroup (PHM) and Toll Brothers Inc.  (TOL) are now in bull market territory since setting cycle lows between Oct. 22 and Dec. 26. They are cheap given their P/E ratios between 7.54 and 9.80, according to Macrotrends. Toll Brothers will put this to a test on Tuesday, Feb. 26, when it reports quarterly results.

It's been hard to evaluate the housing market since the government shutdown as the Census Bureau has not been able to release housing starts for December or January. What we know is that overall housing data has been weak, but the National Association of Homebuilders has become more upbeat.

The HAHB Housing Market Index

On Feb. 19, the National Association of Home Builders announced that their Housing Market Index for February rose by four points to 62 in February. The NAHB cites lower mortgage rates as a positive backdrop for the market for single-family homes. Members are upbeat on the U.S. economy and forecast a positive spring selling season. The buyer traffic component rose to 48 but remains below the neutral reading of 50. Home affordability remains a drag on the housing market given the difficulty in finding suitable building lots, a labor shortage and tariffs on lumber. The NAHB graph below shows the single-family housing starts reading for November.

Monthly Graph of the NAHB HMI vs. Single-Family Housing Starts

On Feb. 21, the National Association of Realtors reported that Existing-Home Sales fell to an annual rate of 4.94 million in January. In my opinion, this decline was caused by the government shutdown as agencies involved in the mortgage market could not offer their services. As this graph shows the decline in existing home sales began in the second quarter of 2018, but now that the government is back in full employment with lower mortgage rates, the housing market should stabilize, which will help the homebuilders. The median price of existing homes peaked at about $277,000 in June and was down to $249,000 in January. The NAR notes that the population-adjusted sales rate is 19.5% below the turn-of-the-century level.

The Daily Chart for D. R. Horton

Courtesy of MetaStock Xenith

D.R. Horton closed up Friday at $40.84, up around 16.2% so far in 2019, and in bull market territory 25.1% above its Dec. 24 low of $32.19. The stock is also in correction territory, below its Aug. 21 high of $46.91.

Trading Strategy: Buy weakness to my monthly value level of $36.93 and reduce holdings on strength to my semiannual and annual risky levels at $44.52 and $45.79, respectively.

The Daily Chart for KB Home

Courtesy of MetaStock Xenith

KB Home closed Friday at $23.87, up around 24.6% so far in 2019, and in bull market territory, some 41.5% above its Nov. 15 low of $16.82. The stock is also in bear market territory, around 25.2% below its March 23, 2018 high of $31.83.

Trading Strategy: Buy weakness to my annual and monthly value levels at $21.10 and $18.72, respectively, and reduce holdings at my semiannual pivot at $23.74, which was tested on Thursday. My quarterly risky level is above the chart at $32.57.

The Daily Chart for Lennar

Courtesy of MetaStock Xenith

Lennar closed up Friday at $50.25, up around 26% so far in 2019, and in bull market territory far above its Dec. 26 low of $37.29. The stock is also in bear market territory around 24.2% below its April 5 high of $64.90.

Trading Strategy: Buy weakness to my monthly value level of $42.22 and reduce holdings on strength to my semiannual, quarterly and annual risky levels at $52.00, $58.76 and $64.25, respectively.

The Daily Chart for PulteGroup

Courtesy of MetaStock Xenith

Pulte closed Friday at $27.98, up around 6.2% so far in 2019 and in bull market territory, far above its Oct. 23 low of $20.64. The stock is also in correction territory around 16.5% below its June 12 high of $33.04.

Trading Strategy: Buy weakness to my semiannual and monthly value levels at $26.17 and $23.67, respectively, and reduce holdings on strength to my annual and quarterly risky levels at $34.30 and $35.76, respectively.

The Daily Chart for Toll Brothers

Courtesy of MetaStock Xenith

Toll Brothers closed Friday at $37.68, up around 13% so far in 2019 and in bull market territory above its Oct. 22 low of $28.68. The stock is also in bear market territory, far below its Feb. 27, 2018 high of $49.24.

Trading Strategy: Buy weakness to my monthly value level of $30.50 and reduce holdings on strength to my quarterly and annual risky levels at $45.50 and $48.16, respectively. My semiannual pivot is a magnet at $36.79.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.