This morning we got a bad home builders sentiment index reading, which experienced the largest drop since 1985. This obviously is having an impact on the home builder stocks. Today I want to take a look at the iShares Dow Jones U.S. Home Construction ETF ($ITB).
This ETF has been trading in a rising range since last September with resistance having been tested four times (including today’s price action). During the recent advance in home builders we can see that the Relative Strength Index (RSI) began to diverge at the start of 2014 – making lower highs while $ITB made higher highs. This gave us a clue that if resistance were to be tested again, price would be unable to break out as momentum weakened.
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