D. R. Horton (DHI) has made a strong recovery from its late 2008 nadir below $5, but looking forward any further gains in DHI may be hard to achieve.
In this daily chart of DHI, above, we can see that prices are above the rising 200-day moving average line, but prices have been testing the flat 50-day average. Volume has not expanded on this year's rise, which is not the pattern of price and volume we want to see. The On-Balance-Volume (OBV) line has been in a sideways trend, telling us that neither buyers nor sellers are aggressive. Momentum divergences are not an issue now.
In this three-year weekly chart of DHI, above, we can see that prices are above the rising 40-week moving average line. Volume has declined during the rally this year, which is not a strong picture. Ideally, volume should expand on rallies. The OBV line on this weekly time frame has been flat the past year. The 12-week momentum study shows a lower high being made this year while prices made higher highs. Prices going up while momentum is going down is a bearish divergence. It is not an immediate sell signal but a warning that the rally is slowing.
Strategy: If long DHI I would use a sell stop below $30 to take profits on longs. A strong close above $35 would prompt us to re-evaluate our current stance.