Homebuilder D.R. Horton Inc. (DHI) has broken out to new highs. What lies ahead on the charts? Let's check it out.
In this daily bar chart of DHI, below, we can see that prices made a "V" bottom in March. Prices were more than cut in half in just a few weeks, but they have recovered fairly quickly to make new 52-week highs. DHI is above the rising 50-day moving average line and the rising 200-day line. In late June we can see a bullish golden cross buy signal as the 50-day line crossed above the slower-to-react 200-day line. The On-Balance-Volume (OBV) line has been rising since early April and tells me that buyers of this homebuilder have been more aggressive. The Moving Average Convergence Divergence (MACD) oscillator corrected lower from June into early July but now it has turned higher for a fresh outright go-long signal.
In this weekly bar chart of DHI, below, we went back a few extra years to show a possible expanding or broadening pattern. Sometimes broadening patterns are reversals and sometimes they are continuation patterns. Right now, this looks like a large continuation pattern. Prices are above the rising 40-week moving average line. The weekly OBV line is strong and pointed higher and the MACD oscillator is bullish on this longer time frame.
In this daily Point and Figure chart of DHI, below, we can see the upside breakout and a nearby price target of $75.
Bottom line strategy: DHI has broken out to a new high, so traders should go long on available weakness risking a close below $56. The $75 area is our first price target. $100 is a potential longer-term target.
