Housing is on the 'verge of a breakout': Technician

The homebuilder trade
The homebuilder trade   

On Wall Street, there's no place like home.

Existing home sales surged to a 5 ½-year high last month as more first-time buyers loaded into the market. And with housing stocks near multiyear highs, some traders think there's no sweeter place to put your money.

"I think housing stocks are names you should continue to own here, especially in the face of wages improving and jobs growth," David Seaburg, Cowen and Co.'s head of sales trading, said Monday on "Power Lunch."

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According to Seaburg, with an improving economic backdrop and rate increase in the "foreseeable future," the housing market should continue to see buyers piling in. "There's going to be a lot of people trying to get ahead of this rate hike," he said. "And more importantly, I think that when jobs do improve, they've been very concentrated to the cities. I think that will spread out a lot more and it's going to spur a lot of demand in suburban-type areas for housing."

Technical analyst Todd Gordon agreed that there's a solid foundation in the space. "We're seeing great relative strength" compared to the broader market, said Gordon, also on "Power Lunch." The homebuilders ETF, which trades under ticker symbol XHB, is already up 9 percent year to date, while the S&P 500 has risen 3 percent in the same period. "We look to be on the verge of a technical breakout."

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The XHB has rallied more than 38 percent from its October low to its March high, but since then has settled into a trading range. Now that the ETF is testing the top of that range at $37.25, any break of that level could mean significant upside, said Gordon.

"The space looks good technically and I think there's a pretty good tail wind behind this sector right now," said Gordon, founder of TradingAnalysis.com. "We'll look to play this to the long side."

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