Mover Mike

Here’s a surprise to me!

In September of 2007, I wrote a piece about Standard Pacific (SPF), Beazer Homes (BZH) and Hovnanian (HOV) that compared them to mortgage brokers and suggested, based on credit default spreads that these companies might be headed for serious trouble. I took a look at those charts today, and found to my surprise that they are still hanging in and not one has defaulted.

I also, pulled up a chart of the ETF on homebuilders iShares Dow Jones US Home Const. (ITB) . Again I was surprised.

Tuesday, MarketClub had a free video, Getting simple with GOOGLE, that demonstrated a simple method to determine the trend of a particular stock using trendlines. The video shows Google (GOOG) and how a simple trendline would have kept you out of a $300 decline in the price of the stock. Remember, for a trendline to be valid, it should touch at least three highs to be a bearish trendline or three lows for a bullish trendline.

Using MarketClub, I pulled up a weekly chart of ITB and it shows a peak in February, 2007 at over $44 and $13.41 in January, 2008 and rally to $22.99 and then a test of the January low at $11.94 in July. We are currently trading at $14.84. The surprising thing is after drawing a bearish trendline that touches four times, the stock price is trading just under the trendline. Looking at relative strength, while the stock went lower on the test of the January lows,relative strength did not come close to the old lows. I’m wondering if we have seen the worst for the homebuilders?

Beazer Homes was singled out as a solar home builder and for being a bargain stock for selling at 1/3 of book value.

Tags: Investing //
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