Want to narrow down the homebuilding sector to a couple of buys? Here’s how. (December 12, 2012)
XHB LEN DHI TOL BZH KBH PHM
I’m Dan Fitzpatrick at StockMarketMentor.com on 12/12/12, December 12th, Wednesday. The fed just came out and announced that they’re going to continue the party, the monetary party program, and continue to buy more bonds, which puts more money into the market. Bernanke, and rightfully so, is concerned about the strength of the recovery, so to speak, if you want to call it a recovery, and then also the whole fiscal cliff thing, so you’d expect him to continue to pump money. So what does that lead us to? Well, if the fed is going to continue to juice the economy with free money, that’s going to keep rates really, really low. Now there’s been a lot of talk about a resurgence in housing. Now the market’s been anticipating this resurgence; it’s had a nice move higher, but it’s been in consolidation here. So what do we do? Well, just kind of back into it; if we got all this free money, rates are going to be low, there is a sense that the economy’s going to get better, to a certain extent, because it couldn’t have gotten much worse, so that implicates yet another move in housing. Now, do I think you’ve got to just rush out and buy the XHB ( $XHB SPDR S&P Homebuilders (ETF) )? No, but you have to recognize that today this is up 2.3 percent, that’s the biggest move of all the major sectors on Bernanke’s announcement. You look at the five-minute chart, and you can really see, it was actually going all day, but then once the announcement was made it just kind of juiced it. By the way members, I’ve got a video devoted almost exclusively to five-minute charts to show you how to trade volatility squeezes. If you’re just getting this free chart video consider joining Stock Market Mentor just for this video, and then go ahead and hoodwink me; then as soon as you look at the video, cancel your membership and you got something for free; it’s fine with me, because I won’t know that you did that. Check that out, it’s going to be really helpful to you. Let’s get back to the homebuilders. We look at Lenar ( $LEN Lennar Corporation ), this is a stock that’s printing higher lows. Now we’ve still got this flat top here, and that’s problematic, but doesn’t this higher while give you a sense that maybe this is more of a consolidation as opposed to a reversal? I don’t know that that’s the case, but I think you can start taking a position in here, and it wasn’t too long ago when I was saying, you know, let’s short these things. Now, D.R. Horton ( $ DHI D.R. Horton, Inc. ), definitely a lot of overhead resistance here, a lot of overhead resistance, so it’s not really one that you just want to jump into; Lennar is ( $LEN Lennar Corporation ) the better one. Toll Brothers ( $TOL Toll Brothers Inc ), same thing, it’s in a bit of a downtrend, getting nice oversold bounce here, actually not that oversold, but it doesn’t have that much potential. We look at Beazer ( $BZH Beazer Homes USA, Inc ), no, I don’t think so, KB Home ( $KBH KB Home ), you know, we can go on and on; I can look at Pulte ( PHM PulteGroup, Inc ) if you want. Okay, Pulte’s ( PHM PulteGroup, Inc ) got some potential, so we look at Pulte ( PHM PulteGroup, Inc ), we look at Lennar ( $LEN Lennar Corporation ). Which do you want? Buying both of them does not make you diversified; it just means that you can’t make up your mind. Pulte’s ( PHM PulteGroup, Inc ), a $17.00 stock, Lennar ( $LEN Lennar Corporation ) is a $38.00 stock, so if it’s important to you that you own a certain number of shares, then you want to buy Pulte ( PHM PulteGroup, Inc ), they’re both up almost identically, about 4.5 percent today. As we’ve gone through this whole thing, we’ve really narrowed it down to this; we got a nice rally in homebuilders, of all the homebuilders that I looked at, Pulte ( PHM PulteGroup, Inc ) and Lennar ( $LEN Lennar Corporation ) are or the two good candidates. Check that out, I hope this type of analysis works for you, and I’ll be around tomorrow. Have a good evening. Free Chart