The demand for products and services in the home renovation sector has seen a sharp increase in recent months, as people around the world have found themselves attached to the inside of their homes. In this article, we will analyze several charts of the sector as a whole and try to determine how traders ‘ assets, will seek to position itself in the weeks or months ahead to take advantage of the increased demand.
SPDR S&P Builders ETF (XHB)
The purchase of new houses or the renovation of existing ones has been a trend that has captured the attention of many people around the world as it appears to have been one of the few things that has been under the control of people over the course of the COVID-19 pandemic. Take a look at the chart of the SPDR S&P Builders ETF (XHB) below, you can see that the fund price has recently moved above the combined resistance of the horizontal trendline and its 200-day moving average.
The strong rebound since the March lows has triggered a renewed interest by the bulls, and the recent price action suggests that momentum is likely to resume the upward trajectory until the major technical indicators suggest the contrary. Based on this model, the short-term target, the price will probably be close to the 2020 high of $49.35, with stop-loss orders set below $41.78 in the case of a sudden change in market sentiment.
Williams-Sonoma, Inc. (WSM)
As the top of the holding of the XHB ETF, one of the companies that will be of particular interest to active traders is likely to Williams-Sonoma, Inc. (WSM). As you can see on the chart below, the price has recently moved back above the 200-day moving average and has crossed above the influence of the trend curve.
The recent increase in the buying pressure has also triggered a bullish crossover between the 50-day and 200-day moving average, which is indicated by the blue circle. This popular long-term buy signal will probably be noted by those who follow the technical analysis and risk management perspective, stop-loss orders will probably be placed below $65.82 in the case of a sharp movement down.
Lowe’s companies, Inc. (LOW)
Another top holding of the XHB ETF that looks ready to make a movement on the rise is lowe’s companies, Inc. (LOW). As you can see on the chart below, the strong rebound since the March lows has sent the price above the 200-day moving average, which triggered a bullish crossover between the 50-day and 200-day moving average (represented by the blue circle).
The followers of the technical analysis will be very likely to expect that the price of Lowe to head over here. However, most are likely to be put in stop-loss below $111.17 to protect against a sudden change in sentiment.
The Bottom Line
People around the world have spent more time in their homes and in search of opportunities to improve or make them more comfortable. As discussed above, builders and businesses in the home improvement or specialty retail have seen a natural rise in the demand for their products and services. Based on the tables presented above, it seems that this increase in demand, could continue to send prices higher from here.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.