Homebuilders KB Home And Toll Brothers Are Above Their Monthly Pivots. DR Horton, Lennar And PulteGroup Are Not. Here’s How To Trade Them Now.

I follow these homebuilders every day: DR Horton (DHI), KB Home

KBH
, Lennar

LEN
, PulteGroup

PHM
and Toll Brothers

TOL
. Each of these stocks set new 2023 highs on Wednesday, June 7. Each stock had golden cross buy signals on their daily charts between November 28, 2022, and January 6, 2023. They also tested their 200-week simple moving average, or ‘reversion to the mean’ as a buy signal between October 2022 and January 2023.

By definition, a golden cross on a daily chart occurs when the 50-day simple moving average moves above the 200-day simple moving average. This signals that higher prices will likely follow. Buying on weakness to its ‘reversion to the mean’ on a weekly chart is usually followed by higher prices.

Let’s look at the weekly charts and key trading levels.

DR Horton (DHI)

Courtesy of MetaStock Xenith.

The weekly chart for DR Horton is positive but overbought with the stock above its five-week modified moving average of $107.98. Weakness held its 200-week simple moving average or ‘reversion to the mean’ at $67.82 during the week of October 21, 2022. The horizontal lines from top to bottom are the semiannual pivot at $108.10, the annual pivot at $97.71, and the quarterly vale level at $83.18. The monthly risky level at $124.73 is above the chart. The 12x3x3 weekly slow stochastic reading is overbought at 84.05.

Trading Strategy: Book profits on DR Horton on strength to its monthly risky level at $124.73, which is above the chart. Buy weakness to its quarterly value level at $83.18.

KB Home (KBH)

Courtesy of MetaStock Xenith.

The weekly chart for KB Home is positive but overbought with the stock above its five-week modified moving average of $44.28. Weakness held its 200-week simple moving average or ‘reversion to the mean’ at $35.12 during the week of March 17, 2023. The horizontal lines from top to bottom are the monthly pivot at $48.84, the semiannual pivot at $45.74, the annual pivot at $40.21, and the quarterly value level at $25.32. The 12x3x3 weekly slow stochastic reading is overbought at 86.58.

Trading Strategy: Buy weakness to the ‘reversion to the mean’ now at $36.14. Reduce holdings on strength to the May 14, 2021 high of $52.48.

Lennar (LEN)

Courtesy of MetaStock Xenith.

The weekly chart for Lennar is neutral with the stock above its five-week modified moving average of $110.67. Weakness held its 200-week simple moving average or ‘reversion to the mean’ at $74.41 during the week of October 28, 2022. The horizontal lines from top to bottom are the semiannual risky level at $114.59, the annual pivot at $94.14, and the quarterly value level at $84.59. Above the chart is the monthly risky level at $123.30. The 12x3x3 weekly slow stochastic reading is slipping below the overbought threshold of 80.00 at 77.79.

Trading Strategy: Buy weakness to the reversion to the mean now at $82.54. Reduce holdings on strength to the monthly risky level at $123.30.

PulteGroup (PHM)

Courtesy of MetaStock Xenith.

The weekly chart for PulteGroup is positive but extremely overbought with the stock above its five-week modified moving average of $66.63. Weakness held its 200-week simple moving average or ‘reversion to the mean’ at $41.82 during the week of November 11, 2022. The horizontal lines from top to bottom are the risky level at $73.49, the semiannual pivot at $60.81, the annual pivot at $50.89, and the quarterly value level at $45.06. The 12x3x3 weekly slow stochastic reading is overbought at 88.90 after slipping below the extreme reading of 90.93 during the week of May 26, 2023.

Trading Strategy: Buy PulteGroup on weakness to its quarterly value level at $45.06. Reduce holdings on strength to the monthly risky level at $73.49.

Toll Brothers (TOL)

Courtesy of MetaStock Xenith.

The weekly chart for Toll Brothers is positive but extremely overbought with the stock above its five-week modified moving average of $66.95. Weakness held its 200-week simple moving average or ‘reversion to the mean’ at $46.17 during the week of December 9, 2022. The horizontal lines from top to bottom are the monthly pivot at $73.48, the semiannual pivot at $59.37, the annual pivot at $54.72, and the quarterly value level at $51.96. The 12x3x3 weekly slow stochastic reading is overbought at 89.83.

Trading Strategy: Buy weakness to its quarterly value level at $51.96. Reduce holdings on strength to the December 17, 2021 high or $75.61.