It's tough to ignore the strong move in residential construction, aka, homebuilders. While my head tells me to stay away, the charts tell me otherwise. For months I have been using bounces in the sector to reload shorts, but not this time. There is something different about this bounce.
Take a look at the chart of Toll Brothers. A few things jump out at me:
1. The stock is no longer trending down. Rather, we see a range bound price movements with resistance around 24.
2. RSI is improved. The mid level is acting as support, which is what happens in strong stocks.
3. OBV is improving. Volume patterns seem to be shifting from sell to buy.
I would not buy here. In a range bound market, I like to make buys at the bottom of the range or on breakout. A patient well timed entry could lead to nice profits in TOL.