That investors would be in a profit-taking mood in XHB is no surprise. The ETF last traded in oversold territory in late December as part of a three-day pullback shortly after the fund rallied back above its 200-day moving average. And even with Friday's 2% pullback, XHB is trading more than 12% from the low point of its December correction.

Eoin Treacy's view While still at an historically high 200,000, the rate of foreclosures displays every appearance of having peaked in early 2010 and looks likely to continue to decline. There is still a large inventory of homes and this will take time to liquidate. However affordability is at record levels for those with access to credit which should help the demand component recover.

The S&P500 Homebuilders Index remains in a three-year base. It rallied impressively from the October low and is now testing the upper side of the lengthy congestion area. The Index is somewhat overbought in the short-term and potential for a consolidation in this area has increased. The sector has had a number of false dawns since 2008 and will need to sustain a move above 300 to suggest demand has returned to dominance beyond the short term.

Lennar Corp is among the better performers in the sector. It hit a new almost four-year high last week and is somewhat overbought in the short term. It will need to find support in the region of the 200-day MA, currently near $17.50, if the medium-term upside is to continue to be given the benefit of the doubt.