Thursday’s ETF Chart To Watch: State Street SPDR Homebuilders ETF (XHB, MAS, PHM, DHI, TOL, KBH)

Stoyan Bojinov: Selling pressures hit Wall Street as investor confidence in the Euro zone further deteriorated following Fitch Ratings’ statement that continuing European debt woes would pose a risk to American banks. On the home front, investors digested yet another better-than-expected economic releases, as industrial production expanded 0.7% in October, surpassing analyst expectations of 0.4% growth. Gold drifted sideways on Wednesday, settling around $1,760 an ounce as the trading session drew to a close. Crude oil on the other hand soared higher, upwards of 2% on the day, climbing above the $100 mark and settling just below $102 a barrel [see Free ETF Webinar: The Importance Of Agricultural Commodities].

Investors will shift their focus onto the U.S. housing sector as new housing starts data for the month of October is released, making the State Street SPDR Homebuilders ETF (NYSEARCA:XHB) our fund to watch for today. Analysts are expecting for 605,000 new starts, which is a modest decrease from the previous months reading of 658,000.

Chart Analysis

Since tumbling below its 200-day moving average (yellow line) in late July of this year, XHB has endured a serious correction, although the fund appears to have established support above the $13 level. Notice how this ETF held its head above $13 a share on 8/9/2011 and again on 8/22/2011. XHB was fairly range-bound over the next month, once again re-testing support at the $13 level on 9/22/2011. This ETF briefly slipped below support all the way down to $12.21 a share on 10/4/2011, although it quickly regained momentum and went onto to gain a whopping 30% over the next month and a half [see XHB Returns].

Click to Enlarge

Despite this truly impressive comeback, establishing a long position in XHB at current levels is still quite speculative seeing as how the fund failed to establish support above its 200-day moving average on 10/27/2011. Currently, this ETF is trading right underneath its 200-day moving average and will likely look to summit the $17 level in the coming weeks.


This homebuilders ETF may very well climb above $17 a share if the latest housing market data shows signs of recovery. Likewise, a worse-than-expected housing starts data release may pave the way for profit taking [see How ETF Investors Can Save $415 Million]. If XHB succumbs to selling pressures, it may tumble below $16 a share, or perhaps even lower depending on investors reaction. In terms of downside, this ETF has minor support around $15 a share, while major support lies all the way down at the $13 level. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit taking techniques.

Written By Stoyan Bojinov From ETF Database Disclosure: No Positions

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