Homebuilder PulteGroup (PHM) was upgraded to "Outperform" Wednesday at Wolfe Research. PHM is one of the largest homebuilders in the U.S. and they have developments here in Delaware where I am, and they have plenty of company from both national and local builders.
Let's check out the charts and indicators of PHM to see how things look a month before their next earnings release.
In this daily bar chart of PHM, below, I can see a decent rally from the October low. Prices rallied into early February with a price gap in late January. Prices have "filled the gap" and have successfully tested the rising 50-day moving average line. The 200-day moving average line has a positive slope and intersects in the $45 area.
The daily On-Balance-Volume (OBV) line shows a rise from June but has leveled off the past two months. The Moving Average Convergence Divergence (MACD) oscillator has corrected to the downside from early February but it is still above the zero line.
In this weekly Japanese candlestick chart of PHM, below, I see a mixed picture. Prices are in an uptrend as they trade above the rising 40-week moving average line. There have been a number of upper shadows on the candles in the past eight weeks telling me that traders are rejecting the upside.
The weekly OBV line shows some improvement from October in the context of a longer-term decline. The MACD oscillator has been narrowing which tells me that the trend-strength has been weakening.
In this daily Point and Figure chart of PHM, below, I can see a potential upside price target in the $61 area. A trade at $53.09 would likely weaken this chart.
In this weekly Point and Figure chart of PHM, below, I can see a price target of $60.
Bottom line strategy: The housing market is interesting. Your local area may be very strong but the bigger picture may be weak and of course the reverse could be the case. The housing market has slowed in Delaware, but it is still attracting buyers. Traders involved with PHM should stay nimble and prepared to exit longs if prices retreat to the February/March lows.
Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.
