Position for an Important Breakout in PulteGroup

 | Mar 13, 2017 | 11:28 AM EDT
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PulteGroup (PHM) broke out above its July 2016 highs, but a breakout over its early 2013 highs will be more important if it happens -- the charts and indicators suggest you need to be positioned for it instead of reacting to it. Keep reading.

In this daily bar chart of PHM, above, we can see the price action over the past 12 months. PHM rallied in June and July last year, but the gains did not hold and prices retreated back towards the lows of the past year around $18. Prices regrouped in November and December, and January saw a fresh resurgence to the upside.

In the back end of January, PHM gaped above the rising 50-day moving average and the rising 200-day moving average. There is a late golden cross of the 50-day and 200-day moving averages in mid-February. PHM has continued to climb and remains above the rising 50- and 200-day averages.

The On-Balance-Volume (OBV) line has been making new highs along with the price action, as there has been more volume of shares traded on days when PHM has closed higher and less volume on days when PHM has closed lower. The trend-following Moving Average Convergence Divergence (MACD) oscillator moved above the zero line in January, signaling an outright buy.

In this weekly chart of PHM going back five years, above, we can see a four-year consolidation pattern as PHM has crossed above and below $20. The 40-week moving average line is bullish -- prices are above the rising average line. The weekly OBV line has been strengthening the past four months. The weekly MACD oscillator just crossed above the zero line for an outright go long signal.

This Point and Figure chart of PHM shows the four-year consolidation in a different way. A trade at $23.92 will be a breakout and allow us to project an upside price target of $33.28.

Bottom line: PHM is poised to break its 2013 highs and climb still higher. I would look to go long PHM in the $23-$24 area and add on a close above $24. A close below $22 would be my risk point, with $33/$34 my upside price objective.

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