When it comes to relative strength, building and construction stocks are back toward the top of our scans.
How these stocks perform offers a glimpse into economic health and, more importantly, reveals how much risk investors are willing to embrace.
And right now, it’s a green light from these stocks, with new highs on both an absolute and relative basis this week.
Here’s a look at the Invesco Building & Construction ETF $PKB breaking out relative to the S&P 500 $SPY.
After almost 18 years of consolidation and base-building, the PKB/SPY ratio is resolving higher with authority.
The index is composed in large part by industrials and consumer discretionary, which together account for 70% of the assets, with greater exposure to mid-cap companies compared to other similar funds such as the Homebuilders ETF $XHB.
I found some fantastic setups when looking through the components.
One that I really like is KB Home $KBH.
Like the PKB ratio above, KBH is looking to reclaim its old subprime bubble highs.
It checks all my boxes: Big base. Asymmetric risk/reward. Clear level to define risk.
Buyers have been working on absorbing all that overhead supply at this key resistance level since July.
KBH is coiled up and looks ready to break out any day now.
If and when it reclaims its highs from 2005, it'll be tough for me not to find a way to get involved.
When I see a chart like this, it’s hard not to think of what we could do with our Breakout Multiplier strategy.
Working hand-in-hand with Strazza over the past few months, I’ve learned how to use options to add leverage to the best trends. It’s been a game-changer for my trading.
If you want to know how we do it, yesterday, JC and Strazza held a live event and walked through the Breakout Multiplier strategy from top to bottom.
