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.
Momentum Indicator for XHB turns positive, indicating new upward trend
XHB saw its Momentum Indicator move above the 0 level on June 26, 2025. This is an indication that the stock could be shifting in to a new upward move. Traders may want to consider buying the stock or buying call options. Tickeron's A.I.dvisor looked at 81 similar instances where the indicator turned positive. In of the 81 cases, the stock moved higher in the following days. The odds of a move higher are at .
Technical Analysis (Indicators)
Bullish Trend Analysis
The Moving Average Convergence Divergence (MACD) for XHB just turned positive on June 23, 2025. Looking at past instances where XHB's MACD turned positive, the stock continued to rise in of 49 cases over the following month. The odds of a continued upward trend are .
XHB moved above its 50-day moving average on June 23, 2025 date and that indicates a change from a downward trend to an upward trend.
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 .
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where XHB advanced for three days, in of 321 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 320 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 RSI Indicator demonstrated that the stock has entered the overbought zone. This may point to a price pull-back soon.
The Stochastic Oscillator demonstrated that the ticker has stayed in the overbought zone for 9 days. The longer the ticker stays in the overbought zone, the sooner a price pull-back is expected.
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 July 01, 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.
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Category ConsumerDiscretionary
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