Schaeffer's Market Observation Features Lennar.Business Editors CINCINNATI--(BUSINESS WIRE)--Feb. 4, 2004 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. ). 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 Schaeffer and Schaeffer's Investment Research. To receive a free email notification each time a new commentary is written about one of the featured stocks or any of your favorite stocks, click on the following link. http://www.schaeffersresearch.com/addinfo. Today we look at home-building concern, Lennar (NYSE:LEN). As always, my intent is to show points of interest from the Expectational Analysis(R) point of view as an educational tool. This column is not meant as a call to action, but as a way to see sentiment indicators Sentiment indicators The general feeling of investors about the state of the market, such as whether they are bullish or bearish. on stocks you follow and to find stocks that may not be on your radar screen. LEN Fact Box - Schaeffer's put/call open interest ratio (SOIR): 0.719 SOIR Percent Rank: 16% Call open interest: 39,181 Put open interest: 28,157 Change in call open interest in the last week: 1,864 Change in put open interest in the last week: 202 Number of shares sold short: 12,849,238 Short interest ratio: 3.3 Short interest change from the previous month: -4% Percent of analysts tracked by Zacks who rate the stock with a "buy": 80% Yesterday's closing price: 44.69 Return over the last six months: 32% Return of the S&P 500 (SPX) over the last six months: 16% Percent the stock is from its 50-day moving average: -5% 9-Day RSI: 44.07 10-Day historical volatility: 35% 100-Day historical volatility: 33% Historical volatility ratio: 1.07 Schaeffer's Volatility Index (SVI): 40% Percent of Range for the SVI: 68% The debate on the "housing bubble" has been going on for quite some time. The argument against housing stocks had some compelling points, but yet stocks like LEN have steadily risen for much of the past four years. However, scanning down the list above, it appears that some complacency com·pla·cen·cy n. 1. A feeling of contentment or self-satisfaction, especially when coupled with an unawareness of danger, trouble, or controversy. 2. An instance of contented self-satisfaction. is creeping creeping 1. gradual progression of a lesion or tissue growth. 2. prostrate growth pattern of a plant, e.g. c. buttercup (Ranunculus repens), c. caustic (Euphorbia drummondii), c. charlie (Glechoma hederacea), c. into the LEN. The SOIR SOIR Schaeffer's Put/Call Open Interest Ratio SOIR Simultaneous Operations on Intersecting Runways is near the low end of its yearly range and call additions have outpaced put additions in the past week. At three times average daily volume, I would not call short interest "low" but as we will see below, it has been steadily eroding. While the shorts have expressed some expectations for weakness, Wall Street is expressing affection for the stock that is bordering on obscene Offensive to recognized standards of decency. The term obscene is applied to written, verbal, or visual works or conduct that treat sex in an objectionable or lewd or lascivious manner. . Some of this optimism can be expected given the stock has steadily outperformed the market over the past six months. As stated in the past, the power of contrarian analysis comes when sentiment diverges from the price. Here we see price strength so some optimism is to be expected. However, as we will explore in the charts below, there is a concerning development to keep an eye on to watch. - Shak. See also: Eye . Click the following link to see the Schaeffer's Put/Call Open Interest Ratio for LEN: http://www.schaeffersresearch.com/wire?ID=9394. This chart merely puts a face on the data we saw above. Here we can see a steady downtrend downtrend A series of price declines in a security or the general market. Many analysts feel that investors should avoid securities in a downtrend until the pattern is broken. Compare uptrend. in place for the past month. Part of this decline has been exaggerated due to expiration EXPIRATION. Cessation; end. As, the expiration of, a lease, of a contract, or statute. 2. In general, the expiration of a contract puts an end to all the engagements of the parties, except to those which arise from the non- fulfillment of obligations created , but the fact remains that calls are being added faster than puts. Click the following link to see the Chart of LEN's Short Interest: http://www.schaeffersresearch.com/wire?ID=9394. The fact box showed us that short interest was moderately healthy at three times average daily volume, but as this chart shows, this indicator has weakened over the past year. The overall number of shares sold short is now at a new multi-year low. Click the following link to see the Weekly Chart of LEN since February 2003 with 20-Week Moving Average: http://www.schaeffersresearch.com/wire?ID=9394. This weekly chart gives us a long-term view of the stock. Here we can see a steady uptrend uptrend A series of price increases in a security or in the general market. Some investors believe a security tends to take on a certain inertia; as a result, these investors search for stock in an uptrend, thinking that it will probably continue to move in that has generally found support at the 20-week moving average and an ascending channel Ascending Channel An upward moving channel formed with two parallel, upward sloping trendlines. The upper trendline connects a stock's highs over a period, with each subsequent high price higher than the previous. . The security has pulled back to these two indicators, which are near a support zone just above 42. It is not surprising that strong performance such as this as elicited e·lic·it tr.v. e·lic·it·ed, e·lic·it·ing, e·lic·its 1. a. To bring or draw out (something latent); educe. b. To arrive at (a truth, for example) by logic. 2. a degree of optimism. And these good feelings do not dictate that the rally has to end. It just means that the risk is growing. The concern comes from the daily chart below. Click the following link to see the Daily Chart of LEN since September 2003: http://www.schaeffersresearch.com/wire?ID=9394. Here we can see a defined series of lower highs and lower lows that has formed the short-term downtrending channel. We can also get a good view of how the shares have reacted at the support zone from the weekly chart. This downtrend is a concern because of the increasing optimism. It is a signal that the "crowd" is expecting the shares to bounce. The shares are at a support zone where they "should" bounce. This gives us two potential situations - either they bounce or they do not. A failure at this support zone may catch some of the bulls off guard and force some of the optimism to be unwound un·wound v. Past tense and past participle of unwind. unwound unwind in the form of selling. If the shares do bounce, the upper rail of the downtrending should offer resistance somewhere around 47 and this would be the battle to watch. A break above this short-term downtrend would be a bullish Bullish Word used to describe an investor's attitude. Bullish refers to an optimistic outlook, while bearish means a pessimistic outlook. bullish sign for the stock but for now, the shares need to bounce at support and then overtake o·ver·take tr.v. o·ver·took , o·ver·tak·en , o·ver·tak·ing, o·ver·takes 1. a. To catch up with; draw even or level with. b. To pass after catching up with. 2. resistance in order for this optimism to be justified. The best way to take advantage of the timely Schaeffer commentaries is to sign up to receive their free e-newsletters -- Opening View, Midday Report, Market Recap and Monday Morning Outlook. Click here to have the Schaeffer's commentaries delivered to you free via email every day. http://www.schaeffersresearch.com/addinfo. 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 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 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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