Exchange-traded fund (ETF) traders looking for a play this week may want to keep an eye on homebuilders using the Direxion Daily Homebuilders and Supplies Bull 3X Shares (NAIL).
A key mover for the ETF will be the month-over-month building permits data. Any noticeable strength should translate into gains for NAIL.
“The month-over-month Building Permits Report measures the change in the number of new building permits issued by the government,” a Direxion Investments The Xchange article said. “Building permits are a key indicator in projecting future housing starts. The July report showed permits increased during the month for only the second time since January while housing starts posted a significant decline, falling in three of the four major regions. The forecast for the August report is: 1.610 million permits.”
NAIL seeks daily investment results of 300% of the daily performance of the Dow Jones U.S. Select Home Construction Index. The index measures U.S. companies in the home construction sector that provide a wide range of products and services related to homebuilding, including home construction and producers, sellers, and suppliers of building materials, furnishings, and fixtures.
Homebuilders have been a pillar of strength in the real estate market this year, with NAIL providing some evidence with a 60% gain year-to-date. In May, the fund reached as high as 140%, so it has fallen back down to earth, but it could provide a nice entry point for traders.
Right now, it has middle-of-the-road momentum, sitting at 43.89 in the relative strength index (RSI) when looking at the year-to-date chart. It has fallen below its 50-day moving average and is close to touching its 200-day moving average, which is where traders will want to see if there is support at that level.
A Broader Play on Real Estate
Traders who want to play the broader real estate market as opposed to homebuilders can opt for the Direxion Daily MSCI Real Estate Bull 3X ETF (DRN).
DRN seeks daily investment results equal to 300% of the daily performance of the MSCI US IMI Real Estate 25/50 Index. The index is designed to measure the performance of the large-, mid- and small-capitalization segments of the U.S. equity universe that are classified in the real estate sector as per the GICS.
DRN looks primed for an entry point, falling below its 50-day moving average. From a long-term perspective, the ETF looks strong, trading well above its 200-day moving average.
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