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Technicals in KB Home has bulls looking at Toll Bros.

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Shortly after today's 01:00 EST Update, I started "clicking" through some charts of the home builders and saw a nice move taking place in shares of KB Home (NYSE:KBH) $48.59 +4.65% and found a similar trade setup in shares of Toll Brothers (NYSE:TOL) $28.10 +2.96. I profiled a bullish trade for shorter-term traders in Toll Bros. (TOL) on a break above $28.00 as overhead supply is nonexistent based on similar technical setup between these two homebuilders.

Toll Brothers Chart - Daily Interval

A "fitted" retracement on TOL give both short-term bulls a decent trade setup and target of $29.22 in the trade, while a swing trader with a little more time on his/her hands can be targeting a level closer to the $34 level. A stock to monitor going forward that looks to be "leading" by about a day is share of KB Home (KBH).

KB Home Chart - Daily Interval

I liked the 52-week high trade in KB Homes (NYSE:KBH), but felt like I might be "chasing a move." When I pulled up a chart of Toll Brother (TOL) when the stock was still trading below the $28.00, that stock then becomes the bullish candidate on the break higher, looking for KBH type of results. Strange things can happen to stocks when they break to 52-week highs as overhead supply doesn't exist. If old bulls decide to hold, some impressive upside moves can take place.

With recent economic data being somewhat "slow" to "moderate growth" some homebuilders fears of higher interest and mortgage rates have been calmed. That may have bulls coming back into the group should Mr. Greenspan and company (FOMC) leave rates low for the next couple of quarters.

Jeff Bailey
Senior Market Technician
Option Investor

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