3SOF

Thank you very much.  I now know why I lose money in the market; I get tunnel vision.  I see one side of the story that I like and run with it.  At least my wife tells me that I am good looking, because we all know that I am not a smart man.  Good looking boy but dumb!

All HBs are up pretty big today on the better then expected retail sales news. These days HBs will find any excuse to rally because they have been so bearish for a while. However check out the other news today that was skipped over... very important news I think for the real estate market.

http://www.marketwatch.com/news/story/Story.aspx?guid=%7B1075F84E%2D0DCE%2D4484%2DB8D2%2D024F9E64D029%7D&siteid=

California the leader in the economy for the U.S. and the leader in the real estate boom.

"The number of defaults on mortgage payments rose to a three-year high in the second quarter in California, a 67% increase from the year earlier period"

More supply is hitting the market... supply was already at record highs for housing inventory this will just add more fuel to the fire for the decline in HBs. Simple supply and demand will lead the housing market down with a rapid growing amount of supply from over building and defaulting homes and a decrease in demand.

Next week is going to be very important for the direction of PHM. Today PHM gapped slightly up and then continued to run up high just shy of 32.00. The rest of the day it sold off, I suppose today we saw a short squeeze in the morning and then people came to there senses and bag holders sold it off and shorts entered when the HOV news came in on slashing earnings outlook. This short position is almost purely on the outlook of the industry and weakness in real estate and home building. RSI is near 60 and the MACD is in green I expect next week we should see some major pullback action. Though tuesday can be somewhat unpredictable on how the stock will respond to the pause in interest rates. I think if they pause interest rates this may lead to a slight rally or may be neutral, I say neutral because I believe the market has already fully priced the pause of interest rates into the current market levels and this is why we have seen some buying and covering the last 3 weeks.  I dont think a pause in interest rates will help the situation builders face anytime soon, they over built plain and simple and the current situation in real estate doesnt look good.

Quote from: nullzero on August 04, 2006, 10:23:02 PM
Today PHM gapped slightly up and then continued to run up high just shy of 32.00. The rest of the day it sold off, I suppose today we saw a short squeeze in the morning and then people came to there senses and bag holders sold it off and shorts entered when the HOV news came in on slashing earnings outlook.

nullz,

That's a nice read of the day's action.  Applause.

Quote
This short position is almost purely on the outlook of the industry and weakness in real estate and home building.

That's fine, but we want to tie that in with the technicals, and then set up a good trading plan.

Analyzing a stock fundamentally and technically is the easier part, in my opinion.  Actually playing the trade is much more difficult.

For example, July 18, and again on July 21, PHM made new lows for the year.  Anyone shorting those new lows based on the lousy fundamentals (DHI lowered guidance by a whopping 44%!!) had a terrible enty short into the stock, although we can understand their reason for wanting to short it, fundamentally.

PHM rallied about 22% from the July 21 low to Friday's 31.94 high.  Yeeks. 

As they say, "Timing is everything," eh? 

When GIGM reported great earnings in May, it tanked more than 40% thereafter.  "Sell the good news...it's already is factored in."

The builders have had a nice rally the past two weeks.  "Buy the bad news.  Who doesn't know that earnings estimates are being slashed?" 

Just some T2T discussion for those following your thread, because the market can be so counter-intuitive, at times, and it can be difficult for us to undertand. 

That said....

Technically, it's interesting where Friday's rally ended.

If we begin at the July 21 low (#! on the Bearish Rising Wedge pattern in purple), the first rally attempt (purple #2) ended right at the bottom of the prior Bear Flag (June-July pattern in red).  Failed re-test.  PHM sold off to a secondary low (#3 in purple).

Thursday morning, the bottom rail of the Bear Rising Wedge was at 27.98.  PHM gapped down to 28.10, and made a low of 28.08.  In this price range, that was "close enough" to be a validation of that trendline being support.  Confirmation of that fact was the upside takeout of Wednesday's high of 29.01, right at the 50DMA.

The short squeeze was on when PHM printed 29.02...29.03...29.04....and took off to 30.44, closing at 30.20.

The shorts remained under pressure on Friday, as you said nullz, and technically, we're looking to see where next data point is going to be (it's #4 in purple) to complete a Bear Flag or a Bearish Rising Wedge off the July 21 low.

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Technically, it's interesting where Friday's rally ended.

Interesting because:

1. The 31.33 gap from June 2 got filled.  Gaps don't always get filled, but often they do.

2. The bottom of the June-July Bear Flag came in on Friday at 31.68.  PHM went a little above that, to 31.94, before selling off.

3. The top of the Kumo (Cloud), which often serves as resistance when a stock rallies from below it, came in on Friday at 31.99.  The 31.94 high just missed it, by five cents.  I'll post that chart next.

Friday's rally was capped at the top of the Kumo (Cloud).

Next week is going to be fun and volatile  . Well im hoping my PHM trade goes my way. Nice work on the technicals Melf  . Friday would of been a great spot to jump in short in the high 31.00s.

Looking stron on PHM today, my short stop limit is set at next resistance 32.22  time will tell

Short PHM at 31.42.  Stop: The top of the Rising Wedge, at 32.10 today.  Risk: a loss of under 3%.

Nice entry MELF! Hehe I didnt time mine as good but we should all profit in the end . Glad to see you in on this one.

Quote from: nullzero on August 07, 2006, 01:49:02 PM
Nice entry MELF! Hehe I didnt time mine as good but we should all profit in the end . Glad to see you in on this one.

Thanks, nullz.   So far, so good, but 1½ hr. to go. 

Quote from: Terliso on June 07, 2006, 02:23:48 AM
I'm looking to cover PHM this week or possibly tomorrow...
It may found support there @ 200SMA weekly scale

Lucky that I covered PHM @ 27.22 for over 23% profit & it did found support @ 200sma (weekly scale)

Goodluck to both of you nullzero & melf

I forgot you had a thread going on PHM short . Shucks I should of merged it in oh well I guess we can tell the admistrators to do it.

Quote from: Melf Elf on August 07, 2006, 01:39:24 PM
Short PHM at 31.42.  Stop: The top of the Rising Wedge, at 32.10 today.  Risk: a loss of under 3%.

Covered ½ my PHM at 31.05 ahead of the FED.  Didn't get the selloff that I wanted today.  Gain: 1.2%

merged...

Quote from: Melf Elf on August 07, 2006, 03:59:12 PM

Quote from: Melf Elf on August 07, 2006, 01:39:24 PM
Short PHM at 31.42.  Stop: The top of the Rising Wedge, at 32.10 today.  Risk: a loss of under 3%.

Covered ½ my PHM at 31.05 ahead of the FED.  Didn't get the selloff that I wanted today.  Gain: 1.2%

friday was a reversal candle off 3 levels of resistance.  i shorted intraday strength yesterday, expecting phm to sell off and go red on the day, following thru on friday's reversal candle.  instead, phm held the better part of its gains on the day, showing some strength.

i will cover remaining ½ position if phm shows more strength today by printing 31.45, a penny above yesterday's high, for ½% gain on the entire trade.

sorry about typing.   have to type with one hand.