Homebuilders ETF Looks to Build on Recent Gains

ETF Trends

Despite concerns about the housing recovery losing momentum, homebuilders exchange traded funds have steadied in recent weeks.

Earlier this quarter, builders’ confidence in the housing market has slightly improved, but remain at low levels for the third straight month, CBS News reports. [Traders See Upside for Homebuilders ETF]

“Builder confidence has been in a holding pattern the past three months,” Kevin Kelly, chairman of the homebuilders association, said in the CBS article. “Looking ahead, as the spring home buying season gets into full swing and demand increases, builders are expecting sales prospects to improve in the months ahead.”

Even with some headwinds, the iShares U.S. Home Construction ETF (ITB) has gained 4.3% over the past month and the ETF’s technical outlook is improving.

“B ullish momentum is starting to build on the daily chart, after a few months of basing action. ITB bottomed out at the rising 200-day MA and cleared the downtrend line of the base several weeks ago. After stalling shy of $25, the price action has pulled back into support,” said Deron Wagner of Morpheus Trading Group.

ITB’s direct competitor, the SPDR S&P Homebuilders ETF (XHB) , is up 4.7% over the past month. XHB is an equal-weight ETF and while it does hold shares of homebuilders, it also mixes in derivatives plays like USG (USG), Lumber Liquidators (LL), Whirlpool (WHR) and Pier One (PIR). That provides the ETF some exposure to the retail side of residential real estate, making the fund a discretionary play as well. [Big Differences Between Homebuilders ETFs]

“Look for ITB to hold above the 200-day MA at the very least. A breakdown below this level would suggest that the pattern needs more time to develop (or could be breaking down). The 20-day EMA crossed back above the 50-day MA and the 50-day MA has flattened out, which are both positive signs,” added Wagner.

iShares U.S. Home Construction ETF

View photo


ETF Trends editorial team contributed to this post.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

View Comments (0)