Do Not Bet on the Home Building Stocks Yet

Home building stocks including KB Home (KBH), Centex (CTX), Toll Brothers (TOL) and Lennar (LEN) are on a choppy upside price channel. But do not conclude that this upside is necessarily for real. The stocks are making a reaction bounce to the steep declines which followed their all-time highs set in mid 2005.

Investors have bid up the housing stocks in the anticipation of the next wave of good news about the housing market activity. But predicting the next move in the housing market is a tough call. So be very careful with the housing stocks because more downside could be on the way.

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Posted November 29, 2006.