Will the sector maintain its position?

The real estate development industry and construction stocks have been in the spotlight recently, with the XHB SPDR S&P Homebuilders ETF NYSE:XHB is currently at a key support level. As the ETF hovers near this critical point, investors may be wondering whether the sector can maintain its momentum or if a significant pullback is imminent. Compounding the concerns is the fact that a recent earnings beat by a major player failed to lift the stock, suggesting that momentum and the ability to reclaim a higher level may be fading.

Will the residential construction sector maintain its position?

The XHB ETF seeks to closely match the returns and characteristics of the S&P Homebuilders Select Industry Index, which represents the housing subsector of the S&P Total Markets Index. The sector has lagged the broader market year to date, up a modest 5.6%. The sector typically does well during periods of low interest rates and strong economic growth, which boost demand for new homes.

From a technical analysis perspective, traders are on the edge of their seats as the sector is flirting with significant support after making consecutive lower highs on the daily chart. The key support level for the XHB ETF is at $100. If the ETF breaks through this level, the next support level would be at $95, indicating a potential 5% downside if the $100 level is breached. This support level has been holding for several months now, making it a significant area of ​​interest going forward. Investors should keep a close eye on these sector heavyweights when considering an investment in the XHB ETF.

Analyst Ratings and Market Positioning for PulteGroup Before Earnings Announcement

Through its subsidiaries, PulteGroup NYSE:PHM is primarily engaged in home building in the United States. Like the broader sector and ETF, PHM is trading near its central support zone at $110, with near-term downside momentum. Analysts are bullish, with a moderate buy rating, but the company’s upcoming earnings on July 23 are key and could change the narrative.

Earlier, PHM impressively beat estimates, posting $0.51 EPS and a significant revenue beat. However, even impressive earnings may not be enough to change the direction and attitude of the industry, as was recently the case with its competitor, Lennar Corp.

Lennar Corp. Earnings Beat: Stocks Struggle to Gain Momentum, But

Lennar Corp. NYSE: LEN recently released its earnings. The company, which operates primarily under the Lennar brand, posted second-quarter results of $3.45 per share on revenue of about $8.8 billion, beating estimates of $3.23 per share on revenue of about $8.5 billion. Despite that beat, the stock failed to gain momentum, ending the month down nearly 3% and trading near its significant $150 support and breakout area — a worrying sign for the sector.

Toll Brothers’ Relative Performance Outperformance: Analysts’ Insights

Toll Brothers NYSE:TOL is a well-known homebuilder based in Fort Washington, Pennsylvania. It specializes in the design, construction, marketing, sales, and financing of residential and commercial real estate. The company, which is scheduled to report earnings on August 27, is currently trading below its 50- and 20-day SMAs, facing similar momentum challenges as the other two stocks. If TOL breaks below last week’s low, a breakout could be confirmed on a higher time frame, potentially taking the stock toward a rising 200-day SMA near $100.

TOL has performed well since the beginning of the year, posting a 12% increase and an impressive relative advantage over the sector. Compared to its competitors, analysts are more bullish on TOL, with price consensus predicting over 12% growth for the homebuilder.

XHB ETF and Key Home Builders: What to Watch Next

The homebuilder sector, represented by the XHB ETF, is showing signs of a potential pullback as it holds near critical support levels. The performance of key stocks like PulteGroup, Lennar Corp., and Toll Brothers will be key to determining the direction of the sector. Investors should closely monitor these support levels and upcoming earnings reports to gauge the sector’s next move.

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