Homebuilder stocks have been chronic underperformers in 2025, failing to develop any sort of bullish rotation while the major benchmarks have recovered quite well. Since the April 7th market low, the iShares U.S. Home Construction ETF (ITB) has experienced minimal gains, resulting in weak relative performance versus the S & P 500. A review of the charts this week shows that the ITB has rotated to an accumulation phase, marked by a pattern of higher highs and higher lows. Let’s look closer at this week’s breakout and see how this could be just the beginning for this improving industry group. Going into the April low, the ITB was showing all the classic signs of distribution. Price was making lower lows and lower highs, the moving averages were all sloping downwards, the RSI was consistently below 50, and the relative strength was in a confirmed downtrend. In May and June, the price settled into a trading range between $87 and $97, causing the RSI to gravitate towards a neutral 50 reading through that period. So far in July we’ve noted a dramatic change in the technical configuration, with the price making a clear pattern of higher highs and higher lows. The RSI has pushed above the 60 level which indicates bullish momentum, and the relative strength has turned higher. The price has broken above the 21-day exponential moving average and 50-day simple moving average, both of which have now turned higher. This week, we’re now seeing ITB break above the 38.2% Fibonacci retracement level, a signal that often confirms a new bullish phase for stocks. Assuming the price can continue to push higher and eclipse the crucial 200-day moving average, there could be much further upside for homebuilders. What gives us confidence that this breakout phase will continue? The volume picture has become more constructive since early June, when the Chaikin Money Flow (bottom panel) turned positive. This classic volume gauge tracks daily volume readings but weights each reading based on the price action. Quite simply, a stronger up close in price means more important volume on that day. With the Chaikin Money Flow remaining positive, and the Accumulation/Distribution line trending higher, the chart tells us that investors are accumulating shares and we want to participate in that bullish trend. The weekly chart shows that the homebuilders ETF has experienced four major tests of the 150-week moving average since 2018. In each of the three previous instances, a buy signal from the weekly PPO indicator has confirmed a new uptrend phase to lead ITB higher. The April 2025 low came in right at the 150-week moving average, and the weekly PPO generated another bullish signal in early June. Homebuilder stocks have been struggling since Q4 2024, and the returns so far in 2025 have been fairly unimpressive. But given the improving technical configuration, and supportive volume and momentum readings, this could be the beginning of a new phase of outperformance for homebuilders. – David Keller, CMT marketmisbehavior.com DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
