KB Home (KBH) delivered strong first quarter results that highlighted revenue growth of 17% to $678.4 million. Analysts’ expectations of $0.11 earnings-per-share were beat with an adjusted EPS of $0.14. The company reported a gross profit margin of 20.7%, this excluded the amortization of previously capitalized interest and inventory-related charges. Shares in after-hours trading rose over 6% and fell just shy of the $14.00 handle. Price action appears poised to open above the 200-day SMA, which at the close of today traded around the $13.67 level.
Price action on the KBH 60-minute chart show that the initial spike higher triggered a potential bearish butterfly pattern and the respect of the key $14.50 area. Point D is targeted with both the 161.8% Fibonacci expansion level of the X to A leg and the B to C move. If valid, we could see price pullback towards the $13.75 zone. A deeper pullback could find support from point C which trades around the $13.40 region.
If the reversal pattern is short-lived, we could see price target the $15 region. Longer-term resistance remains the $15.63 level.The Trade: Buy KBH shares at $13.75, with a stop loss of $13.25 and take profit of $15.25. The risk/reward ratio is 1:3