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Consumers may not be buying high priced apparel or the latest electronic gadgets, but they still continue to buy homes like there's no tomorrow.

At least that's what KB Home (NYSE:KBH) says. The homebuilder reported quarterly profits of 46%, and net income of $1.07, which smoked estimates of 96 cents. But perhaps that demand is starting to wane? Not according to KBH's record backlog of 16.6%.

KB Home Daily Chart

Back in May it looked like the roof was about to cave in on KB Home, but the stock managed to find support at $25. It then traced a double bottom pattern, and broke the yearlong down trend. KBH is now above the 200-dma, but might find some resistance at $32. The declining volume on the most recent advance doesn't bode well for cracking $32, at least not before consolidating for a while.

Schuler Homes Daily Chart

Shuler Homes (NASD:SHLR), one of Premier Investor's long plays, is up 45 cents today. After we profiled it on 6/25, SHLR pulled back to the up trend line, but has moved higher the past four days. Friday's volatile trading tested both support at the up trend, as well as resistance at $15.25. $15.25 is going to be a critical test for SHLR. After advancing 4 straight days, the stock may have to pause for a couple of days before assaulting this level. The 50-dma has offered much support or resistance lately, but keep an eye for a drop below this line as a near-term sign of weakness. In the event of more severe pullback, the trend line should continue to support prices.

Jeffrey Canavan
Assistant Analyst
www.premierinvestor.net

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