NEW YORK ( TheStreet) -- Homebuilder stocks have set tradable ranges since the PHLX Housing Sector Index ( HGX) (195.73) set a multi-year high at 198.06 on March 20 the day after I wrote, Sell Downgrades Weaken Homebuilder Foundations.From that high to the April 18 low of 174.43, HGX fell a quick 11.9%. On that day I wrote Homebuilder Upgrades Fortify Potential Sinkholes and provided fresh buy-and-trade parameters for the homebuilders I have been covering. On Monday HGX set a new multi-year high at $198.33, up a solid 13.7% from the April 18 low. On March 19 I viewed the construction sector as a "source of funds" then upgraded the sector to underweight on April 18 with new buy-and-trade strategies. Today it's time to book gains on these trades. The construction sector is the most overvalued sector at 17.9% overvalued. Of the 160 stocks in the sector there are 54 rated sell and 28 rated strong sell. With 51.2% of all stocks in the sector rated sell the sector still has an underweight rating. Helping the sector has been better than expected earnings from D R Horton ( DHI), KB Home ( KBH), Lennar ( LEN), PulteGroup ( PHM) and Ryland Group ( RYL) with two more reporting quarterly results this week.
Last week we learned that new home sales rose 1.5% in March to a seasonally adjusted annual rate of 417,000. The National Association of Home Builders described this report as getting half-way back to a normal housing market.
Reading the TableOV/UN Valued: Stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that percentage according to ValuEngine. VE Rating: A "1-engine" rating is a strong sell, a "2-engine" rating is a sell, a "3-engine" rating is a hold, a "4-engine" rating is a buy and a "5-engine" rating is a strong buy. Last 12-Month Return (%): Stocks with a red number declined by that percentage over the last 12 months. Stocks with a black number increased by that percentage. Forecast 1-Year Return: Stocks with a red number are projected to decline by that percentage over the next 12 months. Stocks with a black number in the table are projected to move higher by that percentage over the next 12 months. Value Level: Price at which to enter a GTC limit order to buy on weakness. The letters mean; W-weekly, M-monthly, Q-quarterly, S-semiannual and A-annual. Pivot: A level between a value level and risky level that should be a magnet during the time frame noted. Risky Level: Price at which to enter a GTC limit order to sell on strength.
KB Home ($22.82 vs. $20.73 on April 18): Still has a hold rating and set a new multi-year high at $23.50 on Monday. The weekly chart remains positive but overbought with the five-week MMA at $20.98. My quarterly value level is $13.06 with a semiannual pivot at $22.95 and a weekly risky level at $24.28.
PulteGroup ($21.21 vs. $18.26 on April 18): Has been downgraded to hold from buy with its multi-year high at $21.97 set on Jan. 28. The weekly chart stays positive with a close this week above the five-week MMA at $19.77. My quarterly value level is $17.40 with a weekly pivot at $20.95 and monthly risky level at $24.68.
Toll Brothers ( TOL) ($34.19 vs. $31.56 on April 18): Still has a hold rating with its multi-year high at $38.36 set on Jan. 29. The weekly chart shifts to positive with a close this week above the five-week MMA at $33.69. My annual value level is $31.95 with a quarterly pivot at $34.31 and monthly risky level at $38.20. At the time of publication the author held no positions in any of the stocks mentioned. Follow @Suttmeier This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.