Tuesday, August 10, 2010

LEN Watch

Homebuilder and mortgage provider Lennar Corp. (LEN) is showing bear signals with a lack of supporting news as the company moves toward its Sept. 21 earnings announcement. The signals are accompanied by a 3% price slide and a volume spike from the day before.

LEN $14.15

The new signals are on the parabolic sar and the macd, both of which have moved to bear phase today. Person's Proprietary Signal moved to bear phase on July 28. The fast stochastic has dipped from neutrality below to 20 line, showing the strength of bearish sentiment.

The move is being driven by a rise in options put action, with put volume running nearly 10 times that of calls. But actually,LEN's price has been declining since April, which was the peak of an anemic recovery from a huge slide during the collapse of housing and finance. (The company is in homebuilding and mortgages -- talk about the worst combination possible in that era!)

Today's slide brought the stock back below the 20-day simple moving averages, which it has been flirting with since early July.

On the Person's chart, today's low came close to touching the lower weekly pivot before it pulled back up a bit.

Person's Table
ppspps openupper pivotlower pivot
LEN $14.15 $14.97 jul28 $15.06 +6.4% $13.91 -1.7%

The stock in recent months has been trading in a fairly narrow range.

Reversal Levels
  • $14.50, +2.5%
  • $14.15 <== You are here.
  • $13.99, -1.1%
  • $13.46, -4.9%
Bottom line: I like the signals, I like the volume spike, I like the downtrend within a larger downtrend. But this stock is so range-bound, with a 4.3% average range, that I think it would be an albatross hanging from the neck of my portfolio. A big policy surprise or economics surprise might change the picture, but it seems a bit too stagnant to trade at this point.

The Great Reflation: How Investors Can Profit From the New World of Money OK. The credit bubble burst. Housing, burst. Shockwaves reverberated. Markets collapsed. What lies ahead as we reemerge from the wreckage.

Tim Bovee, Private Trader tracks the trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment. No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
  • psar - Parabolic Stop and Reverse
  • adx - Average Directional Index
  • pps - Person's Proprietary Signal
  • ma20 - 20-day moving average
  • macd - Moving Average Convergence-Divergence
  • sto - Fast Stochastic
About the glance: The colors indicate the state of each signal.
  • trend: Determined by the 5-day moving average, green for up, red for down, yellow for sideways
  • adx: orange for above 30-up, blue for 20-down, purple for in the middle. Red is most prone to whipsaws
  • psar, pps, macd: green for bull mode, red for bear
  • sto: green for overbought, red for oversold, yellow for the neutral zone.

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