The Taylor Wimpey and Persimmon share prices surged on Monday after positive house price data. The TW shares rose by 2.65% to 176p while the PSN shares rose by 2.70% to 3,235p. Barratt Development, the biggest homebuilder in the UK also rose by more than 2%. The three are the best performers in the FTSE 100.
What happened: Taylor Wimpey, Persimmon, and Barratt Development are the three biggest homebuilders in the UK. These firms benefit when there is a strong demand for houses in the UK. In a report today, Halifax said that the house price index (HPI) rose by 1.3% month-on-month in May this year. This was a better growth rate than the expected 1.2%. As a result, the house price index rose by 9.5% year-on-year, better than the previous 8.2%.
Therefore, while these numbers are good for Taylor Wimpey and Persimmon, the concerns are whether the growth will continue in the near term as the UK starts to wind down the stamp duty exemption package. So, what next for the TW and Persimmon share prices?
Taylor Wimpey share price outlook
In my Taylor Wimpey share price outlook published last week, I noted that the stock was at risk of a major decline. The prediction was relatively right as the shares dropped from 178p to 170p. While the shares have jumped today, the head and shoulders pattern that I warned about last week still remains. In technical analysis, this pattern is usually a signal that the price will break out lower.
The price is slightly above the 38.2% Fibonacci retracement level and the upper side of the descending channel. Therefore, I still can’t rule out a situation where the shares decline to the 50% retracement level at 156p. However, a move above the 23.6% retracement level at 186p will invalidate this trend.
Persimmon share price outlook
On the four-hour chart, we see that the Persimmon share price has found a strong resistance level at 3,250p. The shares have also risen above the ascending red trendline and the 25-day moving averages. Therefore, while it is relatively too early to tell, a bullish breakout will be validated when the price moves above the resistance level at 3,250p. However, a drop below the Friday close at 3,140p will invalidate this trend.