Art's Charts

XHB and KBH Hit Retracements

Arthur Hill

Arthur Hill

Chief Technical Strategist, TrendInvestorPro.com

The homebuilders have been relatively weak since mid September. While SPY is within striking distance of a new high for the year (2009), the Homebuilders SPDR (XHB) remains well below its September and October highs. Since mid September, the ETF retraced 50% of its prior advance with an ABC decline. Elliott Wavers would view this as a bullish setup. In other words, the decline represents a correction after a strong advance (July-Sept). The bounce off the 50% retracement looks impressive with good volume. A channel breakout would argue for a continuation of the prior advance and target a move above the September high.



091110xhb Click this chart for details

After a big advance from July to September, KB Home (KBH) retraced over 62% with the Sep-Oct decline. Despite this overshoot, the stock rebounded last week and has been consolidating around the 62% retracement (~15) since early October. A falling wedge formed with the decline and I am marking resistance at 16. After last week's spinning top and long white candlestick, the stock has traded flat around 15-16 the last four days. Look for a break above this area to signal a continuation higher.

091110kbh Click this chart for details

Arthur Hill
About the author: , CMT, is the Chief Technical Strategist at TrendInvestorPro.com. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London. Learn More