Here’s Why I’m Adding Homebuilders To My Long Basket

  • January 16, 2004
  • Derrick Hobbs

As
promised I wanted to start looking at Homebuilders
in some detail. Today let’s
take a look at Beazer Homes
(
BZH |
Quote |
Chart |
News |
PowerRating)
and Lennar
(
LEN |
Quote |
Chart |
News |
PowerRating). They both
have corrected 15%-20% from their highs. The corrections have both been in the
form of a two-step pattern. These corrections are also very similar in size
as it relates to points, percentages, and time of the previous corrections.

In fact, take a look at
BZH. The previous decline was 20% over 32 days. This decline is at 20% over
29 days. This is the kind of SYMMETRY I look for
in stock setups. So, I’m definitely interested in adding homebuilders
to the long basket at this point. If prices trade below the defined support
zones in the charts below, I would be getting out and waiting for another opportunity.
As it stands now though…it’s time to start looking for triggers to go
long.

image src=”https://tradingmarkets.com/media/2004/Hobbs/dh011604-02.gif” />

image src=”https://tradingmarkets.com/media/2004/Hobbs/dh011604-03.gif” />

^next^

Yahoo!
(YHOO) Update:

A couple of nights ago,

(
YHOO |
Quote |
Chart |
News |
PowerRating) released earnings the stock was selling off quite heavily in after
hours, only to find a bid against the 46 price zone and it ultimately rallied
to break even for the session on Thursday. As I stated in the previous
column, I thought 46 would be a bounce point, but I sure didn’t think
it would bounce like it did.

So…what’s my
game plan? I am currently short, and have identified the key 30-minute resistance
zone in the chart below. So, if price clears this zone, I’m out of my
short trade. However, if price can hold below this, my short will stay in play.
Why do I use this zone? Looking back, we had a bearish pattern complete into
an earnings announcement. Price reacted strongly down then bounced back. If
price clears this 30-min. resistance zone, it is saying to me that strength
is still on the bid and to step aside for a small loss.

image src=”https://tradingmarkets.com/media/2004/Hobbs/dh011604-01.gif” />

Have a great weekend!

Derrik
Hobbs