Housing stocks have gone from momentum trades in June to value investments now.

All of the homebuilders that I have been tracking ended Monday below their 200-day simple moving averages, which was the risk I projected in my last article on the industry. All of their weekly chart profiles are negative, with the Florida real estate developer St. Joe ( JOE) and Toll Brothers ( TOL) showing oversold weekly slow stochastic readings below 20 on a scale of zero to 100. At their highs, all of these stocks were overbought with readings above 80.

When I first wrote about the homebuilders on June 17, I viewed the group as the hottest momentum trade in the market. However, I warned that the monthly chart profiles for the homebuilders had become parabolic, a condition that has preceded all bubbles, and on Aug. 26, I made the case that share prices for the housing stocks and St. Joe had in fact peaked in July.

All of the housing stocks I'm covering have declined 20% or more from their 52-week highs set in July, which makes now a good time to consider buying them for longer-term value. You want to buy these stocks when they are at least 20% undervalued, with an oversold weekly chart profile and on weakness to a value level.

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