After an 80% Rise, This Sector’s Big Rally Is Slipping

[Trading With Larry Benedict]( After an 80% Rise, This Sector’s Big Rally Is Slipping By Larry Benedict, editor, Trading With Larry Benedict One of the star performers in the market this year has been the iShares U.S. Home Construction ETF (ITB). ITB is an exchange-traded fund (ETF) that invests in major U.S. homebuilders like D.R. Horton and Lennar. It also has smaller holdings in home improvement retailers such as Lowes and Home Depot. ITB’s peak in late July represented a near 80% rally from its October 2022 lows. That’s a huge gain for a sector that’s sensitive to rising interest rates. But when we [checked in on ITB]( last month (red arrow in the chart below), it had dropped 10%. And buying momentum had steadily fallen. Then its attempted rally earlier this month failed to gain traction. So today I want to see what’s in store from here… Recommended Link [Former Presidential Adviser Blows the Whistle]( [image]( Why are President Biden’s Wall Street donors all buying the same stock? Discover a new law that “promises money” to companies like this one. [Click here.]( -- Momentum Is Steadily Falling The chart of ITB below shows where its rally started last October. After bottoming out, the long-term 50-day Moving Average (MA, blue line) steadily climbed. Then it started to flatten out at the beginning of this month. iShares U.S. Home Construction ETF (ITB) [Image] Source: eSignal Throughout ITB’s uptrend, you’ll also notice two other bullish signals… - Apart from a brief period in March, the 10-day MA (red line) crossed and tracked above the 50-day MA. - The Relative Strength Index (RSI), a momentum indicator, also tracked mainly in the upper half of its range (above the green line). Both of these patterns are common when a stock is in an uptrend. After reaching a new high in July, though, ITB’s rally started to run into resistance (upper orange line). Despite trying multiple times to break above $90, each move fizzled out. This is a classic sign that buyers are exhausted. A look at the RSI in the bottom half of the chart shows us why ITB couldn’t move any higher and eventually fell. To sustain a rally, you need positive buying momentum. New buyers need to come in and push the stock to fresh highs. However, if that momentum steadily fades – as we saw here (lower orange line) – then that stock will eventually fall. When we checked in on ITB back on August 24 (red arrow), the RSI had dropped through support and was tracking in its lower band. Take another look: iShares U.S. Home Construction ETF (ITB) [Image] Source: eSignal We noted that the RSI needed to hold its level and start tracking higher for ITB’s rally to resume. But after briefly piercing resistance – which led ITB to a lower high – the RSI has again drifted lower. So what am I looking for from here? Free Trading Resources Have you checked out Larry's free trading resources on his website? It contains a full trading glossary to help kickstart your trading career – at zero cost to you. Just [click here]( to check it out. Continuing to Drift One of the main characteristics of an uptrend is a series of higher lows and higher highs — just like ITB did throughout its rally. Well, the opposite also applies. ITB made a lower high on September 1. So the next move for ITB will be key for where it heads from here. And again, a big part of that lies with momentum. If the RSI is unable to break higher and remains stuck in its lower band instead, ITB will struggle to hold its current level. And it will continue to drift lower. We’d then look for the 10-day MA to accelerate below the 50-day MA as confirmation of a bigger move down. Regards, Larry Benedict Editor, Trading With Larry Benedict Mailbag Dear Larry, I would like to inform you that I have closed the trade that I bought for $5.05 for $7.10 on 15 September for a gain of 40%... Thank you, Larry, for the opportunity to make money. Warm regards, – Rabiah H. Do you have a gain you’d like to share with us? Let us know at feedback@opportunistictrader.com. IN CASE YOU MISSED IT… [Man Gets Into a Self-Driving Tesla… What Happens Next will Shock Everyone (Video)]( “Hi, I’m Teeka Tiwari...I’m about to get in this Tesla and drive up to a facility just a few miles from here to show you what could be the secret behind Elon Musk’s new AI project… What happens next will shock you…” [Click here to see what happened.]( [image]( [The Opportunistic Trader]( The Opportunistic Trader 55 NE 5th Avenue, Delray Beach, FL 33483 [www.opportunistictrader.com]( To ensure our emails continue reaching your inbox, please [add our email address]( to your address book. This editorial email containing advertisements was sent to {EMAIL} because you subscribed to this service. To stop receiving these emails, click [here](. The Opportunistic Trader welcomes your feedback and questions. But please note: The law prohibits us from giving personalized advice. To contact Customer Service, call toll free Domestic/International: 1-888-208-6550, Mon–Fri, 9am–5pm ET, or email us [here](mailto:feedback@opportunistictrader.com). © 2023 Omnia Research, LLC. All rights reserved. Any reproduction, copying, or redistribution of our content, in whole or in part, is prohibited without written permission from Omnia Research, LLC. [Privacy Policy]( | [Terms of Use](