Key Takeaways
- KB Home shares dropped 6% in extended trading on Tuesday after the homebuilder missed Wall Street’s third-quarter profit expectations.
- The stock sits poised to fall below the lower trendline of an ascending triangle on Wednesday, opening the door for further price fluctuations.
- Investors should monitor key post-earnings price levels on KB Home’s chart at $79, $72, and $64.
- A measured move, which calculates the distance of the ascending triangle near its widest point and adds that amount to the pattern’s top trendline, projects a price target of $108 if the stock resumes its longer-term uptrend.
KB Home (KBH) shares dropped 6% in extended trading on Tuesday after the homebuilder’s third-quarter profit fell short of Wall Street expectations.
KB Home’s shares have risen nearly 40% since the start of the year through Tuesday’s close as investors bid up homebuilder stocks on optimism that interest rate cuts will drive more housing demand, which in turn, will lift sales and margins.
Below, we take a closer look at the KB Home chart and use technical analysis to identify key post-earnings price levels worth watching out for.
Ascending Triangle Breakdown
KB Home shares have traded within an ascending triangle since early July, with the homebuilder’s price failing to break out above the pattern’s upper trendline ahead of the company’s quarterly results.
It’s also worth noting that volumes have been above average in recent trading sessions, indicating the potential for post earnings volatility following the release.
Indeed, the stock sits poised to drop below the triangle’s lower trendline on Wednesday, opening the door for further price fluctuations. The stock fell 6% to $82.15 in after-hours trading Tuesday.
Monitor These Support Levels
Amid anticipated post-earnings selling, investors should monitor three key levels on the homebuilder’s chart.
The first area of interest lies around $79, a location on the chart where the shares could find support near the lower levels of rangebound trading activity from the second half of July to early September.
A breakdown below this level could see the shares fall to the $72 area, a region just above the rising 200-day moving average where investors may seek buying opportunities near a trendline connecting the March and April peaks with similar prices on the chart throughout May and June.
Further selling could lead to a deeper correction down to $64, where the homebuilder’s stock would likely attract bargain hunters near a horizontal line that links a range of consolidation between December and February following an impulsive move higher.
Longer-Term Measured Move Bullish Target
If the stock resumes its longer-term uptrend, investors can project a price target above the all-time high (ATH) using the measuring principle.
To do this, we calculate the distance of the ascending triangle near its widest point and add that figure to the pattern’s top trendline. In other words, we add $21 to $87, which predicts an upside target of $108.
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As of the date this article was written, the author does not own any of the above securities.