DR Horton
DR Horton
DHI
5.14%
49%
- Back above 99.75 double-bottom base buy point
- 104.44 is another possible entry from a handle
- Lower Treasury yields boosting housing demand
Industry Group Ranking
Emerging Pattern
Double Bottom
One of the three positive chart patterns to look for when doing technical analysis of a stock. This pattern looks like the letter W, but in almost all cases, the second leg down should undercut the low price of the first.
D.R. Horton is Thursday's IBD Stock Of The Day. DHI stock is currently in buy range, but investors need to be careful amid uncertainty in the housing and stock market due to the omicron Covid-19 variant.
XThe Dallas-based homebuilder is active in 31 states and operates under the Express Homes, Emerald Homes, Freedom Homes, D.R. Horton brands.
In November, D.R. Horton reported fiscal fourth-quarter results, with revenue that earnings beating Wall Street expectations. DHI stock has a strong 98 EPS Rating and a 94 Composite Rating.
The housing market soared during the pandemic as demand rose out of a push for more space as many worked from home. On the supply side, lumber and other supply chain shortages along with a labor crunch sent home prices rising.
Pending home sales were up over 7% in October month-over-month, according to a National Association of Realtors report on Nov. 29. Low interest rates are helping buoy housing stocks.
But the Covid-19 pandemic isn't over yet. Much is unknown about the new omicron variant of the coronavirus, whose first recorded case reached the U.S. on Wednesday, but it could hit consumer confidence and depress home sales.
Meanwhile, if the market uptrend, already under pressure, turned into a correction, housing stocks would likely come under some pressure.
On the flip side, if omicron worries fade, mortgage rates could rebound, denting housing demand and housing stocks.
So, investors do need to be cautious. If you buy DHI stock or other housing stocks, keep any such purchases small.
DHI Stock
Shares rose 5.1% to 102.88 on the stock market today. DHI stock is currently in buy range after breaking out of a double bottom base with a 99.75 buy point, according to MarketSmith analysis. Investors could view 104.44 as a handle entry as well.
Other homebuilder stocks are also offering potential buying opportunities for investors.
Toll Brothers (TOL) shares climbed 5.9% to 68.51, breaking out of a 67.44 handle buy point in a consolidation going back to early May. But the luxury builder is reporting earnings next week. Investors should be cautious buying a stock ahead of earnings as a slight miss in analyst expectations could send the stock tumbling.
Century Communities (CCS) shares jumped 7.3% to 77.22. The stock is breaking out from a handle with a 75.47 buy point on a larger consolidation going back to late May. Century Communities is the top-ranked stock in IBD's Building-Residential/Commercial group.
Investors have the option to look at multiple housing-related exchange traded funds. An ETF is a good way for investors to take advantage of multiple segments of an industry, while also reducing the risks associated with investing in a single stock.
iShares U.S. Home Construction ETF (ITB), SPDR S&P Homebuilders ETF (XHB), Daily Homebuilders & Supplies Bull 3x Shares ETF (NAIL) are options for investors to consider.
Follow Gillian Rich on Twitter for investing news and more.
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