KB Home (KBH) and linar (flexible) It posted earnings on Wednesday after the close and the reports could not have come at a more interesting time.
And the Federal Reserve (the US central bank), on Wednesday, raised interest rates by 0.75 percentage points, with plans to continue raising interest rates until the end of the year.
Chairman Jay Powell spoke specifically about the housing market, noting that it would be good to see a correction. (It will also help reduce inflation.)
this after, after 30-year mortgage rates are at their highest since 2008. Higher interest rates will only drive up mortgage rates in the meantime.
All of this news preceded the announcement of these two companies’ earnings. Both companies won profits but lost revenue, with sales growing 29% year over year for Lennar and 25% for KB Home.
Let’s take a look at the graphs.
Trade Lennar stock on earnings
Lennar bucks the general trend in the market today, as its shares are up about 2.5% during the session. The stock does not jump, but settles above a key level.
For those who expect the housing market to remain mostly healthy – or who expect homeowners to escape the correction relatively unscathed and maintain fairly flat margins and profitability – holding above this support level is a huge positive for the bulls.
Specifically, this is because the shares remain above $70 to $71.50.
In that area, we have a major support/resistance pivot, the 200-week moving average and the 50% retracement from the all-time high to the 2020 low.
if This area is broken, which opens the possibility of a retest of the 2022 low near $62.50 and a retracement of 61.8% near $60.50.
On the upside, bulls really need to see Lennar stock higher and stay above the $80-$82 area. If he can do that, he puts the stock on the 10-week and 21-week moving averages and opens the door to the $89 region and the 50-week moving average.
Trade major KB stocks on earnings
KB Home stock hasn’t performed as well as Lennar, with shares down about 4% in the last check.
With the day’s decline, stocks hit multi-week lows. If the stock trades below $26, it opens the door to 2022 lows of just under $25 and back off Moving average of 200 months.
Below these levels, the $19 to $20 area is in play.
On the upside, I see $30-$32 as resistance, provided KB Home stock exceeds its 10-week and 21-week moving averages.
Between the two, Lennar looks better from a technical perspective.