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Seeing some sell signals in homebuilders

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While I'm looking for some biotechnology short/put candidates, recent analysis presented in the Index Trader wrap also has me looking for some potential downside action in the homebuilders after their euphoric move higher in the past couple of months.

I've put out a couple of names in the market monitor and here's another homebuilder generating a sell signal in today's trade, where bears may look to establish some partial positions on the bearish side as there certainly appears to be "a lot of air under there."

Ryland Group (NYSE:RYL) - $1 box


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Longer-dated Treasury YIELDS edged higher again today and has the Dow Jones Home Construction Index (DJUSHB) 446.76 -4.08% sinking to a session low, along with the PHLX Housing Index ($HGX.X) 284.64 -2.3%. Yesterday, we saw shares of Centex (NYSE:CTX) $79.70 -2.79% generate a double-bottom sell signal and today it is Ryland Group (NYSE:RYL) $70.77 -4.3% doing the same at $72.

Aggressive bears may be looking for some PARTIAL position trades at this point, and monitoring the "building sector" bullish % in coming weeks for a downside reversal to "bear alert." Wednesday's FOMC interest rate decision could have impact on the group. Should the Fed decide not to cut interest rate, we might look for higher YIELDS in the longer-dated 10-year and 30-year. If so, mortgage rates might back up a bit and put some pressure on the homebuilders. Current trade in this group looks to be that of profit taking after a monumental run, but there's a lot of "air" under some of these stocks on their point and figure charts that could provide some good downside action if sector bulls respond negatively to next weeks FOMC announcement.

Jeff Bailey

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