KB Home Is Not Afraid of the Fed

 | Mar 13, 2017 | 8:38 AM EDT
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kbh

KB Home  (KBH) has broken out on the upside from a large base pattern. KBH has a firm foundation that could support a long-term double from here -- check the charts and indicators below.

In this one-year daily chart of KBK, above, we can see how it has climbed from March 2016, with a long July-February consolidation and the recent upside breakout above $17. KBH is above its rising 50-day moving average line and above the slower to react 200-day moving average line. The 200-day average was last tested in late October/early November, about halfway through the consolidation phase.

The On-Balance-Volume (OBV) line has moved higher the past 12 months, signaling more aggressive buying and confirming the price gains. The Moving Average Convergence Divergence (MACD) oscillator has been above the zero line for much of the past 12 months and is currently in a strong bullish configuration.

In this weekly chart of KBH, above, we went back five years to show the size of the base pattern and the importance of the upside breakout at $17. Taking a measurement from a "neckline" drawn across the rally highs the past two years (not shown) down to the bottom of the "head" around $10 and adding it to the breakout point at $17 gives us a tentative price target of $24. Prices are above the rising 40-week moving average line. The weekly OBV line made a new high for the move up confirming the price breakout and the MACD oscillator is bullish.

In this modified Point and Figure chart of KBH (plots use the average true range instead of a "traditional" scaling), above, we can see a "triple top breakout" and a possible longer-term upside price objective around $36-$37.

Bottom line: despite fears of higher interest rates, KBH made an important upside breakout on the charts. Traders and investors could buy KBH here and on further strength above $19, risking to $16.50 for now. $24 and then $36 areas are our upside price objectives.

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we like this chart here, it appears ready to move higher. BOUGHT BZUN OCT 35 CALL AT 3.40
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