Homebuilders D. R. Horton (DHI - Get Report) , KB Home (KBH - Get Report) , Lennar (LEN - Get Report) , PulteGroup (PHM - Get Report) and Toll Brothers (TOL - Get Report) have had bull market gains since election day. Only KB Home extended gains to a post-election high on Wednesday after the National Association of Home Builders announced that their Housing Market Index surged six points to 71 in March.

The housing market index is based on expected sales of single-family homes over the next six months. A neutral reading is 50, and the level for March was just a point shy of the June 2005 high of 72.

Builder optimism is based on the notion that regulatory reforms that have stifled home construction will soon be eased by President Trump. However, the NAHB warns that the index may slip in the months ahead on "rising materials costs, higher mortgage rates and shortages of lots and labor".

Investors beware. The HMI peaked at 72 in June 2005 and homebuilder stocks peaked one month after. As measured by the PHLX Housing Index, housing market plunged 81.5% into March 2009.

Monthly Graph of NAHB HMI vs. Single-Family Housing Starts

The NAHB HMI at 71 in March is in blue, scaled on the left side of the graph. Single-family housing starts are in red, scaled on the right side of the graph. Note that the 823,000 units reading is for January. Single-family starts rose to 872,000 in February. Note that the HMI is leading the rise in starts by a significant margin. When the index was 72 in June 2005, single-family starts were approaching 1.8 million units.

Here's a scorecard for five major homebuilders followed by their weekly technical charts.

 

D R Horton

 

Courtesy of MetaStock Xenith

D. R. Horton is in bull market territory, 24.7% above its Nov. 9 low of $26.69, and set its multiyear intraday high of $33.88 on March 10. The stock is 22.3% below its July 2005 peak of $42.82.

The weekly chart is positive but overbought, with the stock above its key weekly moving average of $31.52. Weekly momentum is projected to rise to 84.39 this week, rising above the overbought threshold of 80.00. Buy weakness to my monthly value level of $29.17. I show a semiannual pivot of $33.33. Sell strength to my annual risky level of $35.04.

KB Home

Courtesy of MetaStock Xenith

KB Home is in bull market territory, 33.5% above its Nov. 8 low of $14.17, and set its multiyear intraday high of $18.98 on March 15. The stock is 77.9% below its July 2005 peak of $85.45.

The weekly chart is positive but overbought, with the stock above its key weekly moving average of $17.55. Weekly momentum is projected to rise to 85.58, above the overbought threshold of 80.00. Buy weakness to my annual value level of $14.93. My semiannual pivot is $17.29. Sell strength to my semiannual risky level of $23.29.

Lennar

Courtesy of MetaStock Xenith

Lennar is in bull market territory, 31.4% above its Nov. 9 low of $39.68, and set its multiyear intraday high of $53.79 on March 10. The stock is 24.3% below its July 2005 peak of $68.86.

The weekly chart is positive but overbought with the stock above its key weekly moving average of $48.57. Weekly momentum is projected to rise to 85.97 this week, above the overbought threshold of 80.00. Buy weakness to my semiannual pivot of $48.95. Sell strength my annual risky level of $59.99.

PulteGroup

Courtesy of MetaStock Xenith

PulteGroup is in bull market territory, 32.4% above its Nov. 9 low of $17.69, and set its multiyear intraday high of $23.82 on March 10. The stock is 51.4% below its July 2005 peak of $48.22.

The weekly chart is positive but overbought, with the stock above its key weekly moving average of $21.90. Weekly momentum is projected to rise to 89.12 this week, moving above the overbought threshold of 80.00. Buy weakness to my semiannual and annual value levels of $20.77 and $19.83, respectively. Sell strength to my semiannual risky level of $28.18.

Toll Brothers

 

Courtesy of MetaStock Xenith

Toll Brothers is in bull market territory 35.7% above its Nov. 9 low of $26.65, and set its multiyear intraday high of $36.74 on March 10. The stock is 38.4% below its July 2005 peak of $58.67.

The weekly chart is positive but overbought with the stock above its key weekly moving average of $33.80. Weekly momentum is projected to rise to 81.98 this week, moving above the overbought threshold of 80.00. Buy weakness to my quarterly value level of $30.92. My semiannual and annual pivots are $34.60 and $35.71, respectively. Sell strength to my semiannual risky level of $37.50.

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