The home construction sector is showing significant strength, with D.R. Horton (DHI) leading the charge. Alongside DHI, other homebuilders like PulteGroup (PHM) and the Homebuilder ETF (XHB) have also maintained strong momentum. However, DHI has displayed relative strength compared to both its peers and the broader market, including the S&P 500.

The technical setup forming on DHI's chart is a classic bullish flag pattern. After a solid rally, the stock experienced a pullback, but it has since held firm. The structure suggests a potential breakout is on the horizon.
 

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We’ve seen two recent breakout attempts. The first met resistance due to profit-taking and increased supply. However, the second attempt showed more promise, as the stock gained momentum with increasing buying efforts. A breakout could be confirmed if the stock commits above yesterday’s high.

Traders are advised to watch for this potential breakout, with a stop loss placed just below the recent swing low at 181.50. If DHI successfully breaks out, it could test its previous all-time highs and even reach new levels beyond that. This makes it one of the 3 key stocks worth monitoring as discussed on 11 Sep 2024.

Watch the video below for a detailed discussion of DHI's trading plan:

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