In early June, the SPDR S&P Homebuilders ETF (XHB) appeared headed for a powerful breakout. The index stalled, and spent the next five sessions consolidating above key support near the March high.

On Tuesday, the SPDR S&P Homebuilders ETF was back in breakout mode with an even more solid base underneath. This could be the initial stage of a fresh rally leg that could carry the sector much higher in the near term.

A standout in the homebuilder sector was Lennar Corp.  (LEN) . The second biggest homebuilder in the U.S. was up more than 2% and tested its 2017 highs. This impressive move extends the stock's gain off the May low to nearly 10%, while leaving layers of support in place in the process. The stock still has an important hurdle to clear, but the current set up is quite bullish. Ahead of next week's earnings report, Lennar is set up well for more upside.

In the near term, investors should consider Lennar a low risk buy on weakness. The stock now has a very solid support zone in place from the $53.50 area down to $52.00. This key zone includes the April and May highs. On the upside a key level to watch is the March peak at $53.80. Once this high is convincingly taken out Lennar will have plenty of room to run. On the downside, a close back below $51.70 would violate last week's low, sending a clear warning sign that more sideways action is ahead.

Of note, Lennar will report its second-quarter earnings results before the bell on June 20.

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This article is commentary by an independent contributor. At the time of publication, the author was long XHB.

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