SPDR S&P Homebuilders (ETF) (XHB) — This ETF tracks the S&P Homebuilders Select Industry Index. The top 10 holdings in XHB are Helen of Troy Limited (HELE), Williams-Sonoma, Inc. (WSM), Lowe’s Companies, Inc. (LOW), Home Depot Inc (HD), NVR, Inc. (NVR), Allegion PLC, A. O. Smith Corp (AOS), Aaron’s, Inc. (AAN), D.R. Horton, Inc. (DHI) and Restoration Hardware Holdings Inc (RH).
I last recommended XHB as the Trade of the Day
for participation in the homebuilding industry on July 10. At the time,
the fundamental and technical picture for the group appeared bright,
and I said: “This is not a trading recommendation; however, for
investors seeking representation in the homebuilder group, XHB is an
excellent and relatively inexpensive method of producing solid long-term
gains.”
Now, however, labor shortages, higher prices for homes and falling
revenues of suppliers have put a price lid on companies in the industry
and the homebuilding ETF.
XHB topped on Aug. 19, above $39, but within three days, the ETF days
fell to a low under $32. Rather than rebounding and establishing an
uptrend, XHB formed a right triangle with bearish implications.
Selling has consistently outpaced buying volume, and the 50-day
moving average is just a fraction from crossing through the 200-day
moving average, which would result in a death cross — a long-term
bearish signal.
Long-term investors who own XHB may want to continue to hold for a
recovery in a year or so. But others should sell shares at the market
price. Traders should consider buying put options on XHB.
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