The tough sledding continues for the bulls. One thing we know from yesterday is the economy right now isn't dictating a push for higher interest rates yet. While finding strong charts might be difficult currently, we can use that knowledge to feel more comfortable with something loosely correlated to benefit from low interest rates: housing.
MDC Holdings (MDC), a homebuilder and mortgage lender, has spent most of August moving higher. This channel has been tight, but strong. Currently, the stock is running into resistance at the top of the channel along with the double top from late June and early July. Consolidating over the past few days between $30.50 and $31.00 sets up well for MDC on another close over $31. If we close under $30.50, then it would be a yellow flag, while a second close under $30.50 would negate the bullish setup.
Contrary to the bearish charts from earlier today, every indicator I pulled for MDC is bullish here. The longer-term moving average convergence divergence crossed over bullish last week while the Ultimate Oscillator -- a blend of short-term, mid-term and longer-term moving averages -- went above 70 for the first time in months. The Force Index is testing highs again along with price. My only small concern is a lower high in the Relative Strength Index (RSI), although it is still strong. The upside here is still moderate at $33.50, but a clear stop close to these levels keeps this one a high-level interest for me on a close over $31.
The weekly chart demonstrates how strong MDC has been in 2015 after a week second half for 2014. The stock has moved up steadily in a bullish channel and now looks to be consolidating with a cup-and- handle setup. The target here is strong coming in at $33.50 on the low side, but with a viable potential to hit $37. The one concern here is the eight-week simple moving average and 21-week SMA have turned lower. I want to see that reverse this week or no later than next week. We've had a positive retest on the Ultimate Oscillator, Force Index and MACD, so price, trend and volume are all working in favor of the stock. The stop would be a bit lower on the weekly chart than the daily chart coming in at $29.50.
Overall, in a tough market I prefer to find something with a positive catalyst. In this case, it's low interest rates. I'd anticipate a solid six weeks before the chatter of rising interest rates comes back around, putting MDC on the map as a possible bullish play if we see a close over $31.
