Shares of homebuilder D.R. Horton ( DHI) are surging Wednesday. The largest-cap stock in the homebuilding/construction sector is up more than 2.25% and is trading above very heavy resistance near the $34.50 area as Tuesday's rally continues. This key zone had capped both the 2016 and initial 2017 highs. DHI is trading at its best levels since April of 2006.

DHI began to struggle with heavy supply near the 2016 high in mid March after surging more than 18% from its first-quarter earnings report. The stock reached a new monthly high in April as the battle with $24.50 continued. The healthy sideways consolidation that followed allowed shares to remain above key support near the January peak. DHI began to improve immediately after testing this area in late April and by early June a second straight higher monthly low was in place. As the stock mounts a breakout of its fourteen week consolidation Wednesday, it is leaving behind a very solid base.

DHI is set up well for more upside. The stock has plenty of room to run before entering overbought territory. Investors should consider the stock a low-risk buy on weakness. Major support is now in place from the $34.60 to $34.00 area. This key zone includes the 2016 highs as well as the March and April highs of this year. On the downside, a close back below this week's low of $33.30 would indicate more sideways action is ahead before a new rally can take hold.

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At the time of publication, Morrow was long XHB.

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