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  • The Trade: Home Builder Stocks, Mortgage Rates, Key Levels  0 comments
    May 7, 2012 11:11 AM | about stocks: MHK, MAS, HD

    This week, we will examine three different companies of whom are benefiting from a low interest rate environment. Many leading stocks in the home-builder and home improvement sectors have soared in 2012 as the 10 year bond yield has declined below 2.00 percent. Last week, the 30 year mortgage rate fell to 3.79 percent which is an all time low. Unlike in 2005, home prices are currently at depressed levels, falling 35 percent from the 2006 peak. Therefore, the ability to obtain a mortgage rate under 4.00 makes housing and property attractive to many investors. Lets take a close look at the stocks that seem to be soaring due to these current interest rate conditions.

    Mohawk Industries, Inc. (NYSE:MHK) is one of the world's leading producers of floor covering products for residential and commercial properties. Some of the products that the company makes include carpets, ceramic tiles, laminates, rugs, carpet pads, hardwood, and resilients. Last week, MKH stock finished at a new three year high closing at $73.52 a share. It is important to note that the stock has surged higher by more than $30.00 since October 4, 2012. The stock looks strong on the charts, trading above all of the important 50, and 200 moving averages. The only problem with the stock is that it is now very overbought and extended on the daily and weekly charts. This formation tells us that the stock may now need to pullback and consolidate before moving higher. The near term resistance area for MHK will be around the $75.50 level. Should the stock pullback from its current price there should be short term support around the $69.00 and $65.50, and $62.00 levels. Take careful note of these levels, place them on your charts and trade them accordingly.

    (click to enlarge)

    Masco Corporation (NYSE:MAS) is another stock in the home improvements and building products business that made a new 52 week high. On October 4, 2012 the stock traded as low as $6.60 a share, last week MAS closed at $14.40 a share. This stock is also short term overbought on the daily chart. The near term resistance levels for MAS stock will be around the $15.75 and $18.00 levels. The stock could be due to a pullback or consolidate before moving higher. Should the stock pullback in the near term there should be support around the $12.80, and 11.65 levels.

    (click to enlarge)

    The Home Depot (NYSE:HD) is just another of the many stocks in the home repair sector that made a new high last week. This time around, the stock made a new 9 year high closing at $51.96 on May 4, 2012. HD stock remains in a strong uptrend at this time. The only problem is that it could be due to pullback if the stock market pulls back. In other words, it could become a victim of the overall stock market which is looking a little weak at the moment. HD stock will have daily chart resistance around the $53.25, and $58.00 levels. Should the stock pullback traders can watch for near term support around the $49.00, and $46.00 levels.

    (click to enlarge)
    Nicholas Santiago

    Stocks: MHK, MAS, HD
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