Then I will provide two "crunching the numbers" tables to provide investors guidance on how to trade these stocks during the next month or so.
The housing index set a 52-week intraday high at 213.81 on Feb. 26, and hit its 2014 intraday low at 189.59 on April 15. On April 17, I wrote, Will the Housing Market Stay in the Tank? Let's Crunch the Numbers on Homebuilders, and today I will answer this question.
First let's look back on my article on March 10, Five Years from the Bottom: Keep an Eye on Housing and Banks where I showed that housing-related stocks peaked first in mid-2005, followed by community banks at the end of 2006 and the regional banks in February 2007. The major averages then began to crash in October 2007. This time a bearish rollover could occur in a more compressed time horizon.
The housing index held its 200-day simple moving average at 189.94, which could slow down a rollover given a weekly close this week above its five-week modified moving average at 196.25.
The National Association of Home Builders reported last week that its Housing Market Index slipped a point to 45 in May, settling in a four-month pause. Homebuilders expressed some hopes that sales would pick up during the upcoming months. They are looking for job growth to become more consistent which should increase home buyers' interest.
Last week, it was reported that housing starts for April rose 13.2% to an annual rate of 1.07 million units, but that was led by multifamily structures. The more important single-family starts rose just 0.8% to an annual rate of 649,000. That is roughly 60% of the normal 1 million to 1.2 million annual rate of production.
Here are some highlights from the first table below -- the key moving averages and 12x3x3 weekly slow stochastic readings.
Only three of the 12 homebuilders in the table had gains since April 12, D.R. Horton (DHI) ($22.19) up just 1.5%, Hovnanian (HOV) ($4.53) up just 1.1% and MDC Holdings (MDC) ($28.46) up 2.6%. Note that Hovnanian reports quarterly earnings on June 4, and analysts' expect the company to report earnings per share of just a penny.
All 14 homebuilders ended last week below their five-week modified moving averages but four have flat or rising 12x3x3 weekly slow stochastics which are positive divergences: Beazer Homes (BZH) ($18.65), DR Horton, MDC Holdings and Meritage.
Only two of the eight companies that support housing had gains since April 12. Fidelity National (FNF) ($33.54), the provider of title insurance and claims management services, has gains of 6.1%. Weyerhaeuser (WY)($30.31), the provider of timber, is up 8.6%.
The biggest loser in a supporting role since April 16 is Vulcan Materials (VMC) ($60.43), the provider of asphalt, concrete and cement, is down 6.9%.
Fidelity and Weyerhaeuser have positive weekly charts with Friday's closes above their five-week modified moving averages with rising 12x3x3 weekly slow stochastics.
Here are some highlights from the second table below - earnings, value levels, pivots and risky levels.
In addition to Hovnanian, Toll Brothers (TOL) ($34.45) reports earnings on May 28; analysts expect the company to report earnings per share of 25 cents.
Among the 18 companies that have reported their quarterly results, 10 beat analysts' EPS estimates and eight missed.
Note that this table shows new weekly and monthly value levels, pivots and risky levels. Quarterly, semiannual and annual levels are the same as in the April 17 post.
Crunching the Numbers with Richard Suttmeier: Moving Averages & Stochastics
This table provides the technical status for the stocks profiled in today's report.
There are five columns with moving average titles: Five-Week Modified Moving Average, 21-Day Simple Moving Average, 50-Day Simple Moving Average, 200-Day Simple Moving Average and the 200-Week Simple Moving Average.
The column labeled 12x3x3 Weekly Slow Stochastics shows the pattern on each weekly chart with readings from Oversold, Rising, Overbought, Declining or Flat.
Interpretations: Stocks below a moving average are listed in red.
Five-Week Modified Moving Average (MMA) is one of two indicators that define whether or not a weekly chart profile is positive, neutral or negative. The other is the status of the 12x3x3 weekly slow stochastic.
A stock with a positive technical rating is above its five-week MMA with rising or overbought stochastics.
A stock with a negative technical rating is below its five-week MMA with declining or oversold stochastics.
A stock with a neutral technical rating has a profile that is not positive or negative.
The 200-Week Simple Moving Average (SMA) is considered a long-term technical support or resistance and as a "reversion to the mean" over a rolling three to five year horizon.
The 21-Day Simple Moving Average is a short-term technical support or resistance used by many hedge fund traders to adjust positions. A stock above its 21-day SMA will likely move higher over a rolling three to five day horizon and vice versa.
The 50-Day Simple Moving Average is also a technical support or resistance used by many strategists and commentators in financial TV.
The 200-Day Simple Moving Average is another technical support or resistance and I consider this level as a shorter-term "reversion to the mean" over a rolling six to 12 month horizon.
Crunching the Numbers with Richard Suttmeier: Earnings & Where to Buy & Where to Sell
This table presents the EPS estimates including date and before or after the close, and where to buy on weakness and where to sell on strength.
EPS Date is the day the company reports their quarterly results.
EPS Estimate is the earnings per share estimate from Wall Street analysts.
Value Levels, Pivots and Risky Levels are calculated based upon the last nine weekly closes (W), nine monthly closes (M), nine quarterly closes (Q), nine semiannual closes (S) and nine annual closes (A). I have one column for pivots, which is a magnet for the period shown. The columns to the left of the pivots are first and second value levels. The columns to the right of the pivots are first and second risky levels.
Investors who wish to buy a stock should use a good-until-canceled GTC limit order to buy weakness to a value level. Investors who want to sell a stock should use a GTC limit order to sell strength to a risky level.
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At the time of publication, the author held no positions in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff