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's Stochastic Oscillator is staying in oversold zone for 3 days
The price of this ticker is presumed to bounce back soon, since the longer the ticker stays in the oversold zone, the more promptly an uptrend is expected.
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 .
The Aroon Indicator entered an Uptrend today. In of 315 cases where XHB Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are .
Bearish Trend Analysis
The Momentum Indicator moved below the 0 level on May 22, 2023. You may want to consider selling the stock, shorting the stock, or exploring put options on XHB as a result. In of 97 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 May 22, 2023. 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 48 similar instances when the indicator turned negative. In of the 48 cases the stock turned lower in the days that followed. This puts the odds of success at .
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 May 18, 2023. 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.
Fundamental Analysis (Ratings)
Notable companies
Industry description
Market Cap
High and low price notable news
Volume
Fundamental Analysis Ratings
The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows
General Information
Category ConsumerDiscretionary
| 1 Day | |||
|---|---|---|---|
| MFs / NAME | Price $ | Chg $ | Chg % |
| VIGRX | 137.25 | 0.42 | +0.31% |
| Vanguard Growth Index Investor | |||
| GSNPX | 16.17 | N/A | N/A |
| Goldman Sachs International Eq Inc P | |||
| WCMGX | 19.23 | -0.06 | -0.31% |
| WCM Focused Global Growth Institutional | |||
| PSCCX | 22.70 | -0.09 | -0.39% |
| PGIM Jennison Small Company C | |||
| RYPDX | 47.98 | -0.59 | -1.21% |
| Rydex Consumer Products A | |||
XHB and
Correlation & Price change
A.I.dvisor indicates that over the last year, XHB has been closely correlated with ITB. These tickers have moved in lockstep 98% of the time. This A.I.-generated data suggests there is a high statistical probability that if XHB jumps, then ITB could also see price increases.
