Breaching the Housing Fortress

Pursuant to a video we did on Friday, housing and homebuilder-related stocks are catching a strong bid this morning, though it may have slightly less to do with rates and more to do with Toll Brothers up more than 12.6% after earnings. 

Still, the XHB and ITB sector ETFs related to homebuilders and housing materials plays are higher by more than 2% and 3%, respectively, as I write this, which is noteworthy indeed regardless of the underlying reasons. 

As we know, the homies have been notably lethargic since the broad market winter correction--Whereas plenty of other stocks, sectors, indices, rather impressively recovered and made fresh highs, the XHB and ITB skipped along the bottom of the lake and missed out on the fun. 

But that dynamic may be changing now, especially if rates do not spike after Jackson Hole later this week and indeed before the significant FOMC in a few weeks into September. 

With this in mind, Floor & Decor is a housing-related retail name which seems to be in the sweet spot to stage a bounce from its beaten-down conditions. 

On the FND daily chart, below, the underwhelming price action this summer is a disgrace compared to names like HD LOW RH WSM, and others in that housing-retail niche, though notable long-term laggards like BBBY and PIR are still floundering. 

But my contrarian view is that FND is a better firm, at least much more than which the market is currently giving it credit. Given that FND sits at the cross-section of retail (a hot sector) and housing (waking up decisively today after a long slumber), the stock makes for an intriguing long over $38 with a tight stop-loss below $36 to mitigate risk. 

Earnings are out of the way for FND, and bulls are running out of excuses to rally this thing given how they have finally breached the housing fortress this morning.