Cracking Foundations For Homebuilders ETFs?

Over the past year, stocks viewed as plays on a residential real estate resurgence, have, well, been resurgent. So have the ETFs these stocks call home.

In that time, the iShares Dow Jones U.S. Home Construction Index Fund (NYSE:ITB) has been one of the top-performing ETFs of any stripe, surging 67.2 percent.

By comparison, the rival SPDR S&P Homebuilders ETF (NYSE:XHB) has been a "laggard," posting a gain of "just" 46.2 percent. However, the juggernaut status of these two ETFs, ITB in particular, may be in near-term jeopardy.

Noted technical analyst Chris Kimble of Kimble Charting Solutions points out the Dow Jones U.S. Home Construction Index, the index ITB tracks, is in technical danger. Currently trading around 495, the index is in curious technical position at the top of a rising wedge chart formation and hovering near the 38 percent Fibonacci retracement level.

Named after the Italian mathematician Leonardo Fibonacci, Fibonacci retracements are used by technical analysts to identify potential support and resistance areas at 100 percent (a security's recent high), 61.8 percent, 50 percent, 38.2 percent and zero percent.

If ITB's index is unable to crack resistance at the 38.2 percent Fibonacci area, Kimble says there is a "two-thirds chance this sector cools off for a while."

The ETF has already shown signs of validating Kimble's thesis, having recently fallen below support in upward channel. A move below $22, where the 50-day moving average just happens to run to, would be a bearish sign.

XHB tracks a different index, the S&P Homebuilders Select Industry Index. However, that ETF is also showing signs of wilting. XHB recently violated its 20-day moving average and the fund is off 3.61 percent in the past five trading days, including a loss of roughly 2.4 percent today. Including today's 3.6 percent decline, ITB has lost almost five percent in the past five days.

Investors should a critical difference between the two funds, that being ITB is more levered to homebuilder stocks. For example, Pulte (NYSE:PHM), DR Horton (NYSE:DHI) and Lennar (NYSE:LEN) combine for over 28 percent of that ETF's weight.

Conversely, while XHB does feature those homebuilders and others among its lineup of 36 stocks, the ETF offers significant exposure to firms that make the products people put in their homes, such as Tempur Pedic (NYSE:TPX) and Pier One (NYSE:PIR).

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