D.R. Horton, Inc. (NYSE: DHI)

D.R. Horton, Inc. operates as a homebuilding company. The company engages in the acquisition and development of land; and construction and sale of residential homes in 26 states and 77 markets in the United States primarily under the D.R. Horton, America’s Builder name. It builds traditional single-family detached homes; and attached homes, such as town homes, duplexes, triplexes, and condominiums. The company markets and sells its homes primarily through independent real estate brokers. It is also involved in the origination and sale of mortgages, as well as provision of title insurance policies, and examination and closing services primarily to the purchasers of its homes. D.R. Horton, Inc. was founded in 1978 and is headquartered in Fort Worth, Texas.

To review Horton’s stock, please take a look at the 1-year chart of DHI (D.R. Horton, Inc.) below with my added notations:

1-year chart of DHI (D.R. Horton, Inc.)

DHI has been trading sideways for the last 2 months. Over that period of time, the stock has formed a clear resistance level at $20 (red). In addition, the stock has also created a strong level of support at $17.50 (blue) that has actually held since mid-August. This rectangle formation on DHI is very helpful in trading because at some point the stock will have to break one of the two levels the pattern has created.

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The Tale of the Tape: DHI has clear levels of support ($17.50) and resistance ($20). The possible long positions on the stock would be either on a pullback to $17.50, or on a breakout above $20. The ideal short opportunity would be on a break below $17.50.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

Good luck!

Christian Tharp, CMT

Follow me on Twitter: @cmtstockcoach