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D.R. Horton Inc. - (DHI) - June 6, 2024

SIA Charts’ Relative Strength rankings not only help investors to identify which stocks in a universe are outperforming and underperforming against their peers, but also when relative performance trends are changing. Homebuilders have been one of the groups which led the current bull market in its initial stages back in late 2023. Since December, homebuilders’ relative strength has eroded and a recent round of disappointing US housing market data has not helped matters.

DR Horton (DHI) for example reached the top 5 in the SIA S&P 500 Index Report back in January. Since then, it has been steadily sinking in the relative strength rankings, and yesterday it dropped back down into the Yellow Neutral Zone for the first time since October.

Candlestick Chart Shows a Big Head and Shoulders Top Forming. Since the start of this year, a big top has been forming in DR Horton (DHI) shares, indicating a slow but steady shift from accumulation to distribution. Three rallies have failed so far in 2024, two just below $160.00, forming the shoulders, and one just above $160.00, forming the head of a bearish Head and Shoulders Top pattern. Falling away from a lower high, the shares have dropped back under $150.00 and their 50-day average also indicating weakening support.

A close below $140.00 would complete the pattern and signal the start of a new downtrend, Should that occur next potential support may appear around a previous gap in the $122.50 to $125.00 area, or $115.00-$120.00 based on a measured move from the top. Initial resistance appears at the 50-day average near $149.00.

Point and Figure Starts to Struggle.

Late last year, DR Horton (DHI) shares staged a big rally and then pushed through to a new high back in April. Since then, however, DHI has lost upward momentum. The shares have settled into a $136.00 to $166.00 trading range and a new downtrend of lower highs has emerged.

A breakdown below $139.50 would complete a pending double bottom pattern and the start of a new downtrend would be confirmed on a breakdown below $136.80 support. Should that occur, previous highs and lows suggest potential support near $128.90 and $112.20. Initial resistance on a rebound appears in the $150.00 to $154.00 area where a round number, 3-box reversal and downtrend line cluster.

With a bearish SMAX score (which is a near-term 1 to 90-day indicator comparing an asset against different equal-weight asset classes) of 4 out of 10, DHI is exhibiting short-term weakness across the asset classes.

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