Housing Charts: Trading KB Home and Lennar on Earnings

Knowledge base home (KBH) and Lennar (LEN) released earnings on Wednesday after the close and the reports couldn’t have come at a more interesting time.

On Wednesday, the Federal Reserve raised interest rates by 0.75 percentage points, with plans to continue raising rates through the end of the year.

President Jay Powell even talked about the housing market in particular, noting that it would be healthy for him to see a correction. (It would also help dampen inflation.)

This is after 30-year mortgage rates hit their highest level since 2008. Higher interest rates will only push mortgage rates higher in the meantime.

All of this news preceded these two companies reporting earnings. Both companies beat profits but missed revenue, with sales up 29% year-over-year for Lennar and 25% for KB Home.

Let’s look at the charts.

Trading Lennar shares on profits

Lennar stock weekly chart.

Lennar is bucking the broader market trend today, with its shares up around 2.5% on the session. The title does not jump, but it remains above a key level.

For those expecting the housing market to remain mostly intact — or expecting homebuilders to escape the correction relatively unscathed and maintain somewhat flat margins and profitability — hold above from this support level is a huge advantage for the bulls.

More specifically, it is because the shares remain above the $70-$71.50 area.

In this area we have a key support/resistance pivot, the 200 week moving average and the 50% retracement from the all-time high to the 2020 low.

Whether this zone breaks, it opens the possibility that we retest the 2022 low near $62.50 and the 61.8% retracement near $60.50.

On the upside, the bulls really need to see Lennar shares rise above and stay above the $80-82 area. If it can do that, it puts stocks above the 10-week and 21-week moving averages and opens the door to the $89 zone and the 50-week moving average.

KB Home stock trading on profits

Weekly chart of KB Home stock.

Weekly chart of KB Home stock.

KB Home shares are not performing as well as Lennar, with shares down around 4% at last check.

With today’s decline, stocks are posting several weeks of lows. If the stock is trading below the $26 level, this opens the door to 2022 lows just below $25 and the decline Moving average over 200 months.

Below these levels and the $19-$20 zone is in play.

On the upside, I see $30-$32 as resistance, provided KB Home stock can break above its 10 and 21 week moving averages.

Between the two, Lennar looks better from a technical standpoint.

Garland K. Long