By Doug Busch
After a sharp correction from recent highs, homebuilder stocks are beginning to stabilize as buyers step back into the group. Improving momentum, easing selling pressure, and early reversal patterns across several names suggest the sector may be setting up for a rebound.
The iShares U.S. Home Construction ETF fell to its lowest level in 13 months last week but finished on a constructive note. The 10-year closed near the top of its weekly range on the strongest volume seen in 10 weeks, a sign buyers may be starting to step back into the group.
Let's look at the technical picture for two notable names in the group: Toll Brothers and Lennar.
Toll Brothers, a luxury homebuilder, has withstood selling pressure better than its peers. The stock has advanced 29% over the past year compared with a 6% gain from the State Street SPDR S&P Homebuilders ETF. Last week, the stock recorded a bullish inside week, ending a four-week losing streak.
Looking at the daily chart, the stock appears poised for a bullish MACD crossover, with momentum improving from a higher low relative to the signal recorded at the start of April:
Last week's rebound also came near the familiar $125 level, an area that acted as resistance last summer before turning into support twice during the fourth quarter. The failed breakout above the $149.89 cup-base pivot on Feb. 4 marked a key turning point. A doji candle followed by a bearish shooting-star on Feb. 12 and on Feb. 18 confirmed the loss of momentum and triggered the subsequent pullback.
A double-bottom pattern has now emerged, offering a constructive technical setup. Investors can enter here and add above the $153.98 pivot, with a longer-term target toward $195 by early 2027, corresponding to 46% upside from current levels. Remain bullish above $128.
Toll Brothers was trading around $135 Tuesday.
Lennar, one of the largest homebuilders in the U.S., has also lagged the group. The stock is down 16% over the last year, while the ITB benchmark is higher by 1%. But on the ratio chart against the ETF, the stock has started to show outperformance over the last seven weeks.
On the daily chart, bullish RSI divergence has emerged, with RSI forming a higher low in March and May even as price recorded a lower low:
Round-number theory has also come into play at the key $100 level, which previously acted as support last June, December, and again in January. In April, it turned into resistance.
The stock remains 38% below its 52-week high, but recent price action leaves room for optimism. A bullish harami on May 19 was followed by a doji candle the following day. Last week, the stock showed notable relative strength, rallying 8% and printing a bullish weekly engulfing candle as the ITB gained 5%.
Momentum continued to improve late in the week, with the stock reclaiming its 21-day exponential moving average on May 21 and testing the 50-day simple moving average on May 22. Enter here and look for a move toward $110 by the fourth quarter, corresponding to 24% upside from current levels. Remain bullish above $82.
Lennar was trading around $89 Tuesday.
Doug Busch is the senior technical analyst at Barron's Investor Circle . His technical view is added to stock picks, including those published exclusively for Investor Circle readers. A glossary of technical terms is updated regularly with new entries.
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
May 26, 2026 11:41 ET (15:41 GMT)
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