Sales of new homes are surging. This is according to a survey conducted by John Burns real Estate consulting, which revealed that sales of newly built homes jumped 55% year on year in June. It represents the largest annual gain since the housing crisis, at the height of the Great Recession in over a decade.
Industry experts credit the boom of consumer preference for high-tech homes and the demand for suburban housing as more people work remotely and to home school their children for the coronavirus pandemic. “The story is overwhelming. Sales in the far-flung suburban areas are the most robust,” said JBRC founder John Burns, by CNBC.
We will take a closer look at two of the home construction stocks, which have made significant inroads in offering technologically advanced homes and an exchange-traded fund (ETF) that provides the greatest exposure to the industry. We will also discuss important chart levels to watch to the help of technical analysis.
Lennar Corporation (LEN)
With a market capitalization of over $ 20 billion, Lennar Corporation (LEN) operates as a manufacturer primarily under the Lennar brand in the united States. The Miami-based company also provides mortgage financing and related services to home buyers. Lennar remains a leader in the home technology. Its “Wi-Fi CERTIFIED Smart Home Design” allows a perfect control of the voice, shopping, and home automation through Amazon.com, Inc.’s (AMZN), Alexa. The manufacturer of the stock has returned 25.8 per cent so far this year, gaining 71% in the last three months only, from July 17, 2020. Investors also receive a 0.73% yield of the dividend.
After peeling most of their pandemic-induced decline, Lennar shares have remained stuck in a six-week period of consolidation. However, the upward trend has resumed this week, with the stock compensation and the crucial overhead resistance at $66 and now, sitting at only 2% shy of its multi-year high. In another victory for the bulls, the 50-day simple moving average (SMA) crossed above the 200-day SMA at the beginning of the month to generate a golden cross buy signal. Traders who want to play the bullish momentum should consider using the 20-day SMA as a trailing stop. For example, to stay in the position until price closes below the indicator (green line).
D. R. Horton, Inc. (HID)
D. R. Horton, Inc. (DHI) is one of the largest home builders, operating in 90 markets in 29 states. Arlington, Texas-based builder offers smart home technology through its “Connected Home” design. It has a wireless connectivity built-in geofencing technology, hands-free communication, a multi-platform wireless network, and greater energy efficiency. Trading at $62.54, with a market capitalization of $22.74 billion, and the issuance of a 1.12% dividend yield, the stock has jumped 19% year to date (YTD), exceeding the residential construction industry average during the same period of 11% from the July 17, 2020.
The D. R. Horton share price has climbed to a new all-time high on Thursday, comfortably breaking above a consolidation period in the process. The movement corresponds to a buy signal generated by the moving average convergence divergence (MACD) indicator crossing above its trigger line. Those who enter here could use the measured move technique to make money. To do this, the calculation of the distance of the area of consolidation of dollars and add that figure to the point of breakage. For example, add $9 to the breakout point at $ 60, which is equivalent to a $69 profit target. The protection of capital with an initial stop under the July 14 low of $56.68.
SPDR S&P Builders ETF (XHB)
Created in 2006, the SPDR S&P Builders ETF (XHB) seeks to replicate the performance of the S&P homebuilders Industry Index – an equal weighted benchmark of U.S. companies involved in the residential construction industry. As well as providing exposure to Lennar and D. R. Horton, the fund owns home improvement and building products companies, including Lowe’s companies, Inc. (LOW) and Masco Corporation (MAS). More than 2 million shares change hands on a razor-thin 0.03% away most days, making the fund a segment of a favorite among active traders. A 0.35% expense ratio also keeps the cost of ownership manageable to purchase the investors. As of July 17, 2020, XHB assets under management (AUM) of $ 808 million, the rate of 0.98%, and is up 2.76% YTD.
The ETF has formed a symmetrical triangle over the past six weeks, finding support from the 200 days SMA. More recently, the price broke above the pattern’s upper trend line in Wednesday’s session and continued its ascent yesterday. In addition, an anticipation of the golden cross signal indicates a new upward trend. Swing traders who enter at current levels should consider placing an initial stop-loss order on the model of the triangle and raise it under each of the other movements that are more low to let profits run.