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.
XHB in upward trend: 10-day moving average crossed above 50-day moving average on June 05, 2025
The 10-day moving average for XHB crossed bullishly above the 50-day moving average on June 05, 2025. This indicates that the trend has shifted higher and could be considered a buy signal. In of 11 past instances when the 10-day crossed above the 50-day, the stock continued to move higher over the following month. The odds of a continued upward trend are .
Technical Analysis (Indicators)
Bullish Trend Analysis
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where XHB advanced for three days, in of 323 cases, the price rose further within the following month. The odds of a continued upward trend are .
Bearish Trend Analysis
The 10-day RSI Indicator for XHB moved out of overbought territory on May 14, 2025. This could be a bearish sign for the stock. Traders may want to consider selling the stock or buying put options. Tickeron's A.I.dvisor looked at 50 similar instances where the indicator moved out of overbought territory. In of the 50 cases, the stock moved lower in the following days. This puts the odds of a move lower at .
The Stochastic Oscillator may be shifting from an upward trend to a downward trend. In of 63 cases where XHB's Stochastic Oscillator exited the overbought zone, the price fell further within the following month. The odds of a continued downward trend are .
The Momentum Indicator moved below the 0 level on June 13, 2025. You may want to consider selling the stock, shorting the stock, or exploring put options on XHB as a result. In of 82 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are .
The Moving Average Convergence Divergence Histogram (MACD) for XHB turned negative on June 13, 2025. This could be a sign that the stock is set to turn lower in the coming weeks. Traders may want to sell the stock or buy put options. Tickeron's A.I.dvisor looked at 50 similar instances when the indicator turned negative. In of the 50 cases the stock turned lower in the days that followed. This puts the odds of success at .
XHB moved below its 50-day moving average on June 13, 2025 date and that indicates a change from an upward trend to a downward trend.
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 .
XHB broke above its upper Bollinger Band on June 10, 2025. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.
The Aroon Indicator for XHB entered a downward trend on June 11, 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.
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Fundamental Analysis Ratings
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General Information
Category ConsumerDiscretionary
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