2 Homebuilders Ready to Break Out

Two homebuilders have gone through multiple-month consolidations and appear poised to break out. Ryland Group (RYL) and Lennar (LEN), in addition to home building, also offer mortgage services, which have a level of volatility associated with interest rate fluctuation. Trading off weekly charts has the advantage of helping to smooth over volatility, but also the disadvantage of requiring smaller position size to allow for deeper stops. It's one of the trade-offs in a smart money-management plan.

RYL Source: StockCharts.com View Chart » View in New Window »

The weekly chart of Ryland shows the stock coming off its 2013 high and holding at the 38% retracement level of its 2011 low and the 2013 high. It spent the next five months consolidating under resistance in the $45 area, and during this period there have been positive technical developments. The stock price moved above its 20-period moving average last month into upper Bollinger Band range, and this month the 50-day moving average made a golden cross above the 200-day average. There was a bullish crossover in the moving average convergence/divergence indicator (MACD) and the Relative Strength Index (RSI) is above its centerline. Overall volume and positive money flow indications have dropped during the consolidation and will have to improve to confirm a meaningful breakout. There is a 15% short interest in the stock and if the recent price momentum continues and resistance is breached on a closing basis, there could be a covering rally....138 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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