Homebuilder D.R. Horton (DHI) appears vulnerable to another decline as buyers seem sidelined. Let's take a walk through of the charts.
Despite the early strength in shares of DHI today, the overall pattern coming into today is likely to be disappointing to bulls.
During the February-April rally in DHI the volume declined and the On-Balance-Volume (OBV) line only slightly improved, telling us that buyers were not particular aggressive in buying new shares of DHI. The OBV line was softer in May as prices came down. Prices have been crisscrossing the 200-day moving average line and testing the underside of the 50-day.
In this weekly chart of DHI, above, we can see a peak or top formation in the latter half of 2015. Prices sold off sharply as 2016 approached and made a retest with a lower high in April of this year. Prices have traded below and back above the 40-week moving average line. The OBV line has established a lower high on this weekly time frame, which suggests that buyers are less aggressive than during the 2015 high.
In the bottom panel is the Moving Average Convergence Divergence (MACD) oscillator, which is narrowing towars a new sell signal as the two lines are poised to cross.
Putting more weight on the price action before today makes me cautious about the long side of DHI, at least for now.