Jim Cramer rightly points out in his column this morning that dramatically lower interest rates can benefit the housing market and he favored D.R. Horton (DHI) and Lennar Corp. (LEN) . I did a quick review of both companies and DHI looks stronger on the charts so let's check it out closer.
In this daily bar chart of DHI, below, we can see a small double bottom pattern in November and December before prices rallied to an April high. DHI has traded sideways from April and recently recorded a new high for the move up.
DHI is above the rising 50-day moving average line and the rising 200-day moving average line.
Trading volume has declined the past four months and the On-Balance-Volume (OBV) line has worked lower the past three months suggesting that sellers have been more aggressive.
The Moving Average Convergence Divergence (MACD) oscillator recently turned up from the zero line for a fresh go long signal.
In this weekly bar chart of DHI, below, we can see an inverse head and shoulders continuation pattern with a rising 40-week moving average line.
The weekly OBV line has moved sideways since April but could easily make a new high for the move up to confirm the new high in price.
The weekly MACD oscillator is above the zero line and could move up again with the price action.
In this Point and Figure chart of DHI, below, we can see the recent upside breakout and the upside price target of $50.46.
Bottom line strategy: Risking a close below $42.50, traders could probe the long side of DHI at current levels looking for initial gains to the $50-$51 area.
