Homebuilders Optimistic but Full-Fledged Housing Recovery Still Elusive

NEW YORK (TheStreet) -- Homebuilder stocks set trading range lows in mid-October. After gains of 23% to 35% into the week of Thanksgiving, housing data show the market for new single-family homes appears to have stalled at 60% of potential. Continue to trade the ranges in homebuilder stocks. Here's the backdrop.

Within an uneven environment DR Horton (DHI) reported quarterly results on Dec. 16 and beat analysts estimates by one cent with earnings of 28 cents per share. Even with an earnings beat the stock declined to a test but held its 50-day simple moving average at $23.34 on Dec. 16.

Earlier in the month, Toll Brothers (TOL) reported quarterly results on Dec. 10 and missed analysts estimates by a penny with earnings of 71 cents per share. The stock traded to the high end of its trading range at $35.46 then plunged to as low as $30.81 into Dec.16 before rebounding towards its 50-day simple moving average at $32.72 on Thursday.

Clearly, strength into the end of November was an opportunity to book gains on shares purchased at the low end of the trading ranges in October. Before updating the trading ranges for six homebuilders, let's look at the graph that shows how the market for new single-family homes continues to stall at 60% of potential. 

 

The National Association of Home Builders Housing Market Index (in blue above with scale on the left) dipped a point to 57 in December, still above the neutral reading of 50. The NAHB gave this survey a positive spin continuing to expect single-family home construction to rise in 2015.

Not shown in the above graph is single-family housing starts (in red above with scale at the right) slumped 5.4% in Nov. to an annual rate of 677,000 units, down from 696,000 units in Oct. Single-family starts remain well below the normal rate of 1.1 million to 1.2 million units.

Here's the current trading ranges.

DR Horton ($24.70) has a trading range between its Oct. 13 low at $19.29 to a high of $25.94 set on Nov. 21 and is currently above its 200-day simple moving average at $22.61. Between the low and high was a gain 34%. The prior high was $27.74 set on May 15, 2013. This stock is up 10.7% year to date. The weekly chart is positive but overbought with its key weekly moving average at $24 and 200-week simple moving average at $18.46.

KB Home (KBH) ($16.08) has a trading range between its Oct. 13 low at $13.75 to a high of $18.10 set on Nov. 24 and is currently below its 200-day SMA at $16.75 with its July 2 high at $18.98. Between the low and high the gain was 32%. This stock is down 12% year to date. The weekly chart is negative with its key weekly moving average at $16.40 and 200-week SMA at $14.28.

Lennar  (LEN) ($43.45) has a trading range between its Aug. 1 low at $35.74 to a high of $48.00 set on Nov. 25 and is currently above its 200-day SMA at $40.61. Between the low and high the gain was 34%. This stock is up nearly 10% year to date. The weekly chart is negative with its key weekly moving average at $43.97 and 200-week SMA at $31.90.

Pulte Group (PHM) ($20.96) has a trading range between its Oct. 13 low at $16.56 to a high of $22.03 set on Dec. 3 and is currently above its 200-day SMA at $19.26. Between the low and high the gain was 33%. This stock is up 2.9% year to date. The weekly chart is positive but overbought with its key weekly moving average at $20.49 and 200-week SMA at $14.40.

Ryland Group (RYL) ($37.17) has a trading range between its Oct. 13 low at $30.33 to a high of $39.54 set on Nov. 25 and is currently above its 200-day SMA at $37.27. Between the low and high the gain was 30%. This stock is down over 14% year to date. The weekly chart is positive but overbought with its key weekly moving average at $37.08 and 200-week SMA at $30.11.

Toll Brothers ($32.56) has a trading range between its Oct. 13 low at $28.92 to a high of $35.48 set on Nov. 24 and is currently below its 200-day SMA at $34.35. Between the low and high the gain was 23%. This stock is down 12% year to date. The weekly chart is negative with its key weekly moving average at $33.14 and 200-week SMA at $29.31.

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  This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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