During the past three sessions, the Homebuilding Sector ETF (AMEX: XHB) has broken and sustained above its 9, 20 and 50 DMA, and has hurdled its May-Dec resistance line. This is impressive action, and has inflicted meaningful damage to the heretofore dominant multi-month downtrend. On one hand, I should have established a new long position last Thurs or Fri, but on the other hand until I actually see the ability of the XHB to break key near-term resistance and sustain above those levels, I decided to take the prudent "show-me" approach. So far so good.

With the above-mentioned analysis as a backdrop, my near-term work suggests that I will have an opportunity to enter new long positions closer to the 20.50 area in the upcoming sessions. I will wait for another day or so to see if I can buy into pullback weakness. If not, I will cross that bridge then. In either case, my work argues for continued strength in the XHB into the 25.20/70 target zone before the current initial upleg off of the low is complete.

By Mike Paulenoff

Mike Paulenoff is author of the MPTrader.com (www.mptrader.com) , a real-time diary of Mike Paulenoff's trading ideas and technical chart analysis of Exchange Traded Funds (ETFs) that track equity indices, metals, energy commodities, currencies, Treasuries, and other markets. It is for traders with a 3-30 day time horizon, who use the service for guidance on both specific trades as well as general market direction

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