Schaeffer's Market Observation Features Lennar and KB Home.CINCINNATI Cincinnati (sĭnsənăt`ē, –năt`ə), city (1990 pop. 364,040), seat of Hamilton co., extreme SW Ohio, on the Ohio River opposite Newport and Covington, Ky.; inc. as a city 1819. -- Today's Market Observation features Lennar (NYSE NYSE See: New York Stock Exchange :LEN (Low Entry Networking) In SNA, peer-to-peer connectivity between adjacent Type 2.1 nodes, such as PCs, workstations and minicomputers. LU 6.2 sessions are supported across LEN connections. ) and KB Home (NYSE:KBH KBH København (Danish: Copenhagen) KBH Katonai Biztonsági Hivatal (Military Security Office, Hungary; since 1989) KBH Kicked By Horse KBH Ka'anpali Beach Hotel (Maui, HI) ). Schaeffer's Market Observations are market-based reports that provide insight and analysis from a unique and unbiased perspective. Market Observations are published on www.SchaeffersResearch.com - the home of Bernie Bernie may refer to:
Take advantage of the timely Schaeffer commentaries by signing up for their free e-newsletters -- Opening View, Market Recap, and Monday Morning Outlook. Click here to have the Schaeffer's commentaries delivered to you free via email every day and get entered to win an iPod Nano A flash-based digital music player from Apple, introduced in 2005. Like larger iPod models, the nano has a color screen. Although the nano name suggests ultra-small "nanotechnology," the iPod shuffle is actually smaller. See iPod. . http://www.schaeffersresearch.com/redirect.aspx?CODE=PROAW13M&PAGE=1. Sector Update: Is Housing Trying to Bottom? One area that is potentially looking attractive is housing. Yes, the group has been one of the worst performers during the past 12 months, and here at Schaeffer's we've had some successful bearish Bearish Words used to describe investor attitude. A bearish investor believes that a particular asset or the market as a whole will decline in value. bearish plays. However, recently, there have been some clues that at least a tradable bottom could be trying to form. First off, let's simply look at the chart of the ISE Ise (ē`sā), city (1990 pop. 104,164), Mie prefecture, S Honshu, Japan, on Ise Bay. It is one of the foremost religious centers of Shinto, the site of the shrines of Ise. Homebuilders Index (RUF Noun 1. RUF - a terrorist group formed in the 1980s in Sierra Leone; seeks to overthrow the government and gain control of the diamond producing regions; responsible for attacks on civilians and children, widespread torture and murder and using children to commit ). Earlier this week, the index moved above its downward sloping 80-day moving average for the first time in several months, and its 50-day moving average is no longer pointing lower. In fact, it's close to actually pointing higher. So, we have some reasons to think things could be turning around. Click the following link to see a daily chart of RUF since January 2006 with 50-day and 80-day moving averages: http://www.schaeffersresearch.com/wire?ID=17347 . What really got me excited about a bottom forming in this group was last month there was a bearish BusinessWeek cover titled "How Toxic is Your Mortgage?" The graphic was complete with a snake wrapped around house. Now this didn't say go out and buy housing stocks, but it was definitely eye opener that sentiment was starting to get pretty negative. At the time of that article, Bernie noted that a few major housing stocks were down near past levels of major support. Again, this wasn't the clear sign we wanted to see to go long, but it was something to remember. Click the following link to see a monthly chart of Toll Brothers since January 2001 with 48-month moving average: http://www.schaeffersresearch.com/wire?ID=17347 . This now brings us to last week. I think last week had some of the signs that we look for in a bottom. Two different major names reduced earnings outlooks, yet the sector held up nicely. Both Lennar (NYSE:LEN) and KB Home (NYSE:KBH) guided lower for the current quarter and received analyst downgrades as a result. In fact, KBH actually guided lower for the fiscal year. Now here's what I loved; both stocks gapped much lower but actually recovered much of their losses by the end of the day to finish close to breakeven breakeven 1. The level of output or sales necessary to cover fixed expenses. Companies in industries that have high fixed costs and, consequently, high breakevens, such as automobile and steel manufacturing, are likely to exhibit large fluctuations . That's nice intra-day price action that could be signaling a major bottom. Click the following link to see a daily chart of LEN and KBH since January 2006: http://www.schaeffersresearch.com/wire?ID=17347 . It doesn't stop there, as numerous financial websites had very bearish articles on the group last week. I specifically remember one saying "Another Housing Stock Guides Lower" in huge bold letters at the top of the page. Reading the article, it sounded like the entire group was going to go under, as profits were simply evaporating. Now fast forward to this week. Take one guess as to which sector had the biggest weekly gain? Yep, it was housing. I'm aware this is only one week, but the past few weeks' events, coupled with this week's strong performance could be a sign of outperformance from the group on a whole during the coming months. Looking at the analysts, they've definitely turned their back on the group as well. Back in July 2005 when the stocks topped, there were 60 percent "buys," 35 percent "holds," and only five percent "sell" ratings. Looking at the most recent data shows there are now 43 percent "buys," 45 percent "holds," and 12 percent "sells." Also interestingly, back in September 2005 there were 207 analysts ratings, today there are only 154 - suggesting interest has definitely moved elsewhere - energy perhaps? Add all of this up, and the analysts are another clue that a bottom could be forming thanks to a combination of lower overall ratings and a lack of coverage. Now back to that KBH. After the earnings warning and positive price action last week, we liked that one so much we played it in our aggressive Players Series. In just seven market days, we closed out some September 40 calls for a total gain of more than 300 percent! Here are a few other charts from this group that are technically trying to form a bottom. Click the following link to see a daily chart of Meritage Homes and Pulte Homes Pulte Homes, Inc (NYSE: PHM) is a Bloomfield Hills, MI based company founded by Bill Pulte. Pulte is the third largest (by units) builder of homes and residential community developers in the United States according to Builder Magazine's"Builder 100", and is the nation's since January 2006: http://www.schaeffersresearch.com/wire?ID=17347 . In conclusion, housing could be a pocket of opportunity and might be worth looking into for some bullish Bullish Word used to describe an investor's attitude. Bullish refers to an optimistic outlook, while bearish means a pessimistic outlook. bullish plays as we head into the fourth quarter. The best way to take advantage of the timely Schaeffer commentaries is to sign up to receive their free e-newsletters -- Opening View, Market Recap and Monday Morning Outlook. Click here to have the Schaeffer's commentaries delivered to you free via email every day and get entered to win an iPod Nano. http://www.schaeffersresearch.com/redirect.aspx?CODE=PROAW13M&PAGE=1 . About Schaeffer's Investment Research (www.SchaeffersResearch.com) Schaeffer's Investment Research, founded by Bernie Schaeffer in 1981, is a financial information and trading resources company. It publishes Bernie Schaeffer's Option Advisor, the nation's leading options subscription newsletter. The firm's contrarian Contrarian An investment style that goes against prevailing market trends by buys assets that are performing poorly and selling when they perform well. Notes: A contrarian investor believes that the people who say the market is going up do so only when they are fully approach focuses on stocks with technical and fundamental trends that run counter to investor expectations. The firm's website, http://www.SchaeffersResearch.com , is recognized as one of the leading information sources for stock and options traders Traders Individuals who take positions in securities and their derivatives with the objective of making profits. Traders can make markets by trading the flow. When they do this, their objective is to earn the bid/ask spread. and was cited as the top options website by both Forbes and Barron's. Click here for more details about Schaeffer's trading methodology: http://www.SchaeffersResearch.com/method . |
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