December 12

Pick Of The Week – Week 49 Analysis – D R Horton

Our favorite month of the year is finally here!

It’s the time where we get to clear our leave and spend more quality time with our friends and loved ones. Roads and malls are packed at all times.

As we enjoy the cooler weather, many countries outside of Southeast Asia is getting a lot colder. Snow has descended in part of Europe, and winter is fast approaching in America.

Talking about winter, it’s surprising that stocks in the homebuilding industry are performing well! Have a look at PulteGroup (PHM).

Sometimes, the stock market runs light on logic. As traders, we follow price trends and capitalize on the opportunities presented to us.

Let’s have a look at another homebuilder stock, D R Horton (DHI), and identify buying opportunities together!

Big Picture

While the US stock market has only recovered to its Nov high of 4,700, DHI has shot up to form new all-time highs every single day in the past week. This is one heck of a super strong stock!

Have risen by 12.75% in the last 8 days, is it a good time to buy DHI?

If it isn’t a good time to buy DHI now, when is?

Are there key price levels that we can watch for?

Key Price Levels

We can tell that there are 2 support zones while there isn’t a historical resistance zone after zooming out.

The most immediate support zone is at $106 while the next support zone is at $102.50. Remember that support and resistance zones are a price range rather than an exact price level.

Knowing that support and resistance are also known as demand and supply zones respectively, this means that when the price of DHI drops to $106, there’s likely to be buyers to keep it above that price.

And yes! Support and resistance are therefore potential turning points!

Identifying the potential turning points of DHI isn’t sufficient without a look at its internals. Let’s jump in to its internals to find out if prices of DHI is likely to continue soaring or is about to drop.

Technically Speaking

Adding 3 momentum indicators, we can tell that a drop is imminent as all of them are in their overbought region. In fact, the values of all 3 indicators have been lingering in their overbought region for a week or more!  

As mentioned, support zones are also known as demand zones where buyers enter to buy the stock. That’s probably where prices will drop to in the coming days. 

To be on the safe side, let’s think of 3 scenarios which could possibly happen in the next few days.

  1. DHI drops to its immediate support zone at $106 and bounces higher 
  2. DHI drops to its immediate support zone at $106 and lingers around $106 before heading up
  3. DHI falls below its immediate support zone to its next support zone at $102.50

Which of these 3 scenarios do you think will play out?

Now, stop!

You must read this.

As all good traders do, please set your stop loss level.

A stop loss level that’s too close to your entry price may get you stopped out before the price of DHI goes your way. Therefore, it’s highly advisable to set a looser stop loss and I’ve got the indicator and parameter to help you do just that. Check it out in this article. 


DHI is a super strong homebuilding stock that’s outperforming the S&P 500. However, like all good things, this rally has to come to a pause before it can continue to surge. 

Given the price behavior of DHI, I think that Scenario 1 is more probable. I’d love to see the price of DHI holding above its immediate support zone before I build my position and ride it to the stars. 

I’m thankful for your readership and there’s something I need to tell you to keep this friendship. I’m not a financial advisor, so please take this as a fun insight and conduct your own research. 

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