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Vitalii Liubimov's Avatar
published in Blogs
Jan 13, 2021

High Probability Bearish Signals Generated on 4 Homebuilders

The pandemic has changed the housing industry considerably in the past year. Consumers have changed their preferred living arrangements and that has created an increase in the demand for single-family homes.

Because of the increase in demand for homes, the stocks of homebuilders have rallied sharply since last March. The SPDR S&P Homebuilders ETF (XHB) was below $25 at its low in March and it recently moved above the $60 level. That is a huge move for an ETF. With such a big move, many of the stocks have moved in to overbought territory and we see that the weekly stochastic indicators for the XHB are in overbought territory. The 10-week RSI is close to being overbought, but isn’t quite there.

With so many homebuilders being overbought, I found it interesting that Tickeron’s AI Prediction Tool generated bearish signals on four different homebuilders on January 12. The predictions called for declines of at least 4% over the next month and all four had confidence levels over 80%.

The four stocks that received the bearish signals were D.R. Horton (DHI), LGI Homes (LGIH), Meritage Homes (MTH), and Toll Brothers (TOL). If we look at the fundamental screener from Tickeron, we see that three of the four stocks, all but LGI Homes, get poor scores in their Outlook Ratings. Three of the four also get poor ratings from their P/E Growth Rating with Toll Brothers being the only one that doesn’t get a bad score.

All four companies get neutral ratings in the SMR Ratings and the Price Growth Ratings. As you can see in the snapshot above, there are very few scores highlighted in green. D.R. Horton gets two, the Valuation Rating and the Profit vs. Risk Rating, and Toll Brothers and LGI Homes each get one positive rating.

The technical screener shows LGI Homes getting four bearish signals and only one bullish signal. Meritage Homes also gets four bearish signals, but it has three bullish signals as well.

Toll Brothers gets the best marks on the technical side with four bullish signals and two bearish signals. D.R. Horton shows three bullish signals and two bearish signals.

All four stocks have received bearish signals from the Aroon Indicator within the last few weeks. Three of the four have received bearish signals from the Momentum Indicator in the last 10 days and three of the four have received bearish signals from the moving averages.

These companies have benefitted from the change in consumer behavior, but it could be the bearish signals are suggesting that the stocks have rallied to the point that they have gotten ahead of the possible growth for the companies.

You can see a complete analysis and comparison for the companies from Tickeron’s artificial intelligence platform below.

Related Ticker: XHB

XHB's RSI Oscillator recovers from oversold territory

The RSI Indicator for XHB moved out of oversold territory on April 09, 2025. This could be a sign that the stock is shifting from a downward trend to an upward trend. Traders may want to buy the stock or call options. The A.I.dvisor looked at 22 similar instances when the indicator left oversold territory. In of the 22 cases the stock moved higher. This puts the odds of a move higher at .

Price Prediction Chart

Technical Analysis (Indicators)

Bullish Trend Analysis

The Momentum Indicator moved above the 0 level on April 22, 2025. You may want to consider a long position or call options on XHB as a result. In of 84 past instances where the momentum indicator moved above 0, the stock continued to climb. The odds of a continued upward trend are .

The Moving Average Convergence Divergence (MACD) for XHB just turned positive on April 22, 2025. Looking at past instances where XHB's MACD turned positive, the stock continued to rise in of 50 cases over the following month. The odds of a continued upward trend are .

Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where XHB advanced for three days, in of 331 cases, the price rose further within the following month. The odds of a continued upward trend are .

XHB may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options.

Bearish Trend Analysis

The Stochastic Oscillator entered the overbought zone. Expect a price pull-back in the foreseeable future.

Following a 3-day decline, the stock is projected to fall further. Considering past instances where XHB declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .

The Aroon Indicator for XHB entered a downward trend on April 15, 2025. This could indicate a strong downward move is ahead for the stock. Traders may want to consider selling the stock or buying put options.

Notable companies

The most notable companies in this group are Home Depot (NYSE:HD), Lowe's Companies (NYSE:LOW), DR Horton (NYSE:DHI), Lennar Corp (NYSE:LEN), Johnson Controls International plc (NYSE:JCI), Pultegroup (NYSE:PHM), Owens Corning (NYSE:OC), KB Home (NYSE:KBH).

Industry description

The investment seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index derived from the homebuilding segment of a U.S. total market composite index. In seeking to track the performance of the S&P Homebuilders Select Industry Index (the "index"), the fund employs a sampling strategy. It generally invests substantially all, but at least 80%, of its total assets in the securities comprising the index. The index represents the homebuilders segment of the S&P Total Market Index ("S&P TMI").

Market Cap

The average market capitalization across the SPDR® S&P Homebuilders ETF ETF is 29.1B. The market cap for tickers in the group ranges from 959.76M to 380.15B. HD holds the highest valuation in this group at 380.15B. The lowest valued company is HOV at 959.76M.

High and low price notable news

The average weekly price growth across all stocks in the SPDR® S&P Homebuilders ETF ETF was 9%. For the same ETF, the average monthly price growth was 8%, and the average quarterly price growth was 28%. ALLE experienced the highest price growth at 10%, while LII experienced the biggest fall at -6%.

Volume

The average weekly volume growth across all stocks in the SPDR® S&P Homebuilders ETF ETF was -3%. For the same stocks of the ETF, the average monthly volume growth was -2% and the average quarterly volume growth was 43%

Fundamental Analysis Ratings

The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows

Valuation Rating: 63
P/E Growth Rating: 60
Price Growth Rating: 68
SMR Rating: 36
Profit Risk Rating: 32
Seasonality Score: 51 (-100 ... +100)
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