It's hard to believe but the homebuilders are trading near 7 and 8 month highs. As a group, you can follow the homebuilders via the XHB. It's a basket of homebuilding stocks like Ryland (RYL), Centex (CTX), and Toll Brothers (TOL).

The rebound in the XHB -- about 53 % from the January lows -- is one of the most under-reported stories in the financial media. It's kind of funny when you think about it because the homebuilders were one of the leading indicators going into the credit crunch and subprime mess. So, might it be possible that the homebuilders are pointing to a recovery in the economy?

The best way to trade a recovery in homebuilders is through the XHB because it keeps you diversified. If you must pick one name in the group, I would go with RYL. It's still my favorite. I've been trading RYL, and following the homebuilder rebound, since the beginning of the year. You can read more my earlier calls by following the links below:

Ryland (RYL) Rebounds from Triple Bottom

Housing Stocks Lead Recovery

Ryland Group (RYL) Soars Higher by 15 Percent

Housing Stocks (XHB) Could Rebound Higher

As of today, the XHB is trying to breakout from a bullish triangle. I still think this trade has legs, which is why I'm putting the XHB back on your radar today. Look for an upside try early next week. Confirmation will come if the XHB breaks $24.50.

I posted the question yesterday asking if First Solar (FSLR) was tracing a double top or getting ready to breakout from a bullish triangle. Today, we got the answer.

I made the comment yesterday:

When trading solar stocks, the prices of traditional energy sources are really all that matter.

All that means is buy solar stocks when oil goes higher and sell solar stocks when oil goes lower. Today, oil is going higher, a lot higher, reaching record territory up near $113 per barrel.

FSLR is up $11.50 at the time of writing, and was up as much as $16.50 earlier this morning. Today's action is an excellent study in how closely correlated stocks like FSLR are with traditional energy prices.

So, where does FSLR go from here? As long as crude continues higher, FSLR should keep climbing, maybe reaching $300 in the short-term.

Solar stocks are blazing higher, bucking the weakness in the broader market. First Solar (FSLR) is a leader within the sector.

I've been trading FSLR for over a year, but it's been a while since I profiled the stock on this site.

When trading any of the solar stocks, it's important to remember that solar is an alternative to traditional energy sources like oil and natural gas. When trading solar stocks, the prices of traditional energy sources are really all that matter.

Alternative energy sources are increasingly competitive and attractive when traditional energy prices are high. So, right now, with crude oil at $110 and natural gas at $10, solar plays are extremely attractive. If these prices go higher, so too will FSLR and other alternative energy plays. Conversely, if crude oil and natural gas prices reverse lower, FSLR and the other solar plays will weaken.

With this dynamic in mind, I want to point out the confluence of two patterns in FSLR. The first is a double top around the $280 level, extending back to late December. FSLR's recent run caused the stock to become overbought at the same time it was reaching resistance at the double top. Naturally, the circumstances led to a pause in the stock's recent rally.

The other pattern that is unfolding is a short-term bullish triangle. It's curious that the short-term bullish triangle (a bullish continuation pattern) is forming just below the intermediate-term double top (a bearish reversal pattern).

It's almost as if the bulls in FSLR are playing a game of chicken with the bears. Who's going to blink (trade) first? My bet is that both bulls and bears in FSLR are waiting to see what happens in energy prices, especially crude oil. If crude continues higher, moving up to perhaps $115, then the bulls should take charge, break FSLR out from the bullish triangle, and invalidate the double top. Conversely, if crude oil drops to $100 to $105, then the double top will remain valid and FSLR should breakdown from its triangle and pullback to $250 to $260.

Natural gas has been quietly moving higher this year, in the shadow of record crude oil prices. The stocks in the natural gas sector are on fire.

The new 52 week highs list is littered with natural gas companies. Some of the names include:

Apache (APA)
Pioneer Natural Resources (PXD)
Devon Energy (DVN)
Plains Exploration & Production (PXP)
Forest Oil (FST)
Cabot Oil & Gas (COG)
Questar (STR)

I've been following Chesapeake Energy (CHK) since its big rebound in February and breakout from its bull flag in March.

Natural gas, the commodity itself, is worth tracking and even trading in the form of the U.S. Natural Gas Fund (UNG). The UNG is an exchange traded fund that is backed by natural gas.

The UNG is forming a triangle, almost identical to the triangle in crude oil. The UNG will breakout from the triangle with a move above $49; confirmation will come with a break above $50.

Alternatively, if the UNG fails to breakout and instead rolls over, then the natural gas stocks will most likely pullback. Keep the triangle in the UNG on your radar if you're trading the natural gas stocks. The pattern is actionable both from a bullish and bearish perspective.

Watch the triangle unfolding in Exxon Mobil (XOM). It could break in either direction.

The apex of the triangle is at $86, which is right where XOM is trading today. An advance past $89 would mark a breakout to the upside, with confirmation coming after a move beyond $90.

A drop below $83 would mark a breakdown, with confirmation coming if the stock declines below $81.

XOM is arguably the most important stock in the U.S. market. Why? It's the biggest with a market cap of about $460 billion. XOM has a huge impact on the S&P 500; keep close watch of the triangle in XOM and its impact on the broader market.