ETF Trends
ETF Trends

With new home sales at a seven-year high and existing home sales at a five-and-a-half year high, the homebuilder sector-related exchange traded fund could be on the verge of breaking out.

Year-to-date, the SPDR S&P Homebuilders ETF (NYSEArca: XHB) rose 9.1% and iShares U.S. Home Construction ETF (NYSEArca: ITB) gained 6.9%.

Technical analyst Todd Gordon, founder of TradingAnalysis, points out that the housing market has a solid foundation and XHB shows great relative strength compared to the broader market, reports Amanda Diaz for CNBC.

“We look to be on the verge of a technical breakout,” Gordon said on CNBC.

XHB has slowly gained momentum this month and currently shows a rising relative strength index – relative strength is a momentum investing technique that compares the performance of a security to that of the overall market, so adherent investors would anticipate that a strengthening security would maintain its trajectory.

“The space looks good technically and I think there’s a pretty good tail wind behind this sector right now,” Gordon added. “We’ll look to play this to the long side.”

Looking at the fundamentals, the housing market is seeing greater demand.

On Monday, the National Association of Realtors revealed that existing U.S. home sales rose 5.1% to an annual rate of 5.35 million units in May, its highest level since November 2009, Reuters reported.

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