On Tuesday, three of the top six gainers in the S&P 500 are from the homebuilding sector. D.R. Horton (DHI) , the largest of the group, is up more than 6% after opening the session with a huge earnings-inspired breakout gap.
This powerful surge has driven the S&P Homebuilders ETF (XHB) to its best single gain since May of last year. With a solid base underneath, this index is set up well for an impressive run.
Another name near the top of the gainers list is PulteGroup (PHM) . The stock is up more than 5% and is taking out a key overhead trend line that links the October and December highs. PulteGroup is bumping up against its December peak after leaving behind a very solid base. The stock is now set up well for a fresh rally leg ahead of Thursday morning's earnings release.
A solid support zone is now in place between $20 and $19. If Pulte can continue to gain traction off this level post-earnings, it will have plenty of room to run.
On the downside a close back below $18.00 would violate the January low, sending a clear warning sign that more basing will be needed before a rally can take hold.