Paul J Singh

Intellectually my mind is telling me to steer clear of homebuilders, but how can I ignore the charts? Almost every homebuilder is showing a nice bottoming pattern with a breakout and pullback to support. Take a look at this chart of DHI (Horton Inc. D.R.). We have a steep decline, a bottoming base, breakout and pullback to support. On top of that, volume has been ideal, with above average volume on up days and below average volume on down days. This all leads me to believe that the big guys are slowly accumulating the stock. I have no idea why, as almost all economic data points to a a slowdown. However, we are traders, not economists or even investors. You’ve gotta go with the flow, and money is flowing into these stocks.

I’ll be watching how the stock handles the support line at $23. A bounce might get me to buy for a quick trade, while a breakdown below the 50 day MA would get me in as a short.