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Featured Trade (U.S ETF): US Home Builders Sector at major resistance zone

Medium-term technical outlook (1-3 weeks) on S&P Home Builders Sector (XHB)



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Key technical elements

  • S&P Home Builders sector ETF (XHB) recent recovery of 29% from its 26 Dec 2018 low of 30.56 is now hovering below a major resistance zone of 39.53/40.80 which is defined by the former major ascending trendline resistance from Oct 2011 low, the recent swing high area of 20 Aug/12 Sep 2019 and a Fibonacci retracement/projection cluster.
  • Several bullish exhaustion signals have started to emerge. The on-going weekly price action has started to form an impending “Bearish Engulfing” candlestick pattern, a spiked up in volume this week after a series of declining volume readings since 07 Jan 2019 in contrast with an increase in price action. In addition, the daily RSI oscillator has started to exit from its overbought region after a bearish divergence signal.
  • The significant medium-term support rests at 36.08/35.60 which is defined by the former swing high areas of 07 Nov 2018/11 Jan 2019 and the 38.2% Fibonacci retracement of the on-going up move from 26 Dec 2018 low to 25 Feb 2019 high.

Key Levels (1 to 3 weeks)

Immediate resistance: 39.53

Pivot (key resistance): 40.80

Supports: 37.25 & 36.08/35.60

Next resistance: 42.96 & 46.40/47.20

Conclusion

If the 40.80 pivotal resistance is not surpassed, XHB may see a multi-week down move to target  37.25 follow by 36.08/35.60 next.

However, a clearance above 40.80 invalidates the bearish scenario for the bulls to gain control for a further push up towards 42.96 and even a retest on the long-term pivotal resistance at 46.40/47.20.

Charts are from eSignal



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