Don't Ignore This Chart!

This Homebuilder Is Testing Major Gap Support


One of my favorite trades is looking for a bounce off of gap support.  Many times, the top of gap support will provide great support and the stock will never "fill" the entire gap back to the prior close.  PulteGroup (PHM) lost the top of its gap support at 21.03 at Friday's close for the first time and now appears set to completely fill its gap back to 20.42.  There's also price support close to 20.50 that should encourage buyers to emerge.  Take a look:

Since that gap higher and follow through buying in mid-July, PHM has been consolidating and that's allowed its MACD to approach centerline support and also has allowed its RSI to drop back into the 40s.  Check out how the PHM stock price has bounced off recent tests of RSI 40 support.  A gap fill and test of price support down near 20.50 would provide an excellent reward to risk long entry in my opinion.

Happy trading!


Tom Bowley
About the author: is the Chief Market Strategist at, where he provides stock market education, guidance, and trading strategies using a unique combination of technical, fundamental, and historical analysis. Tom provides members with four portfolios (Model, Aggressive, Income, and Value), all designed to beat the benchmark S&P 500, and a revolving Watch List of hundreds of companies reporting strong quarterly earnings (must beat both revenue and EPS estimates) and exhibiting technical strength as well. These companies comprise EarningsBeats' annotated Strong Earnings ChartList (SECL), from which Tom trades exclusively. Tom writes a Daily Market Report (DMR) for members to include an executive summary, market outlook, sector/industry watch, and trading ideas. Learn More
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