NEW

[Melf Elf]

Quote From nullzero:

Anyway to sum it up I doubt NEW will have the profits to cover the div it currently yields and will cut down the div leading to futher decline... tough times ahead and I expect tougher times for NEW. Target possibly in the low 30s.

nullzero,

With the builders tanking, it would seem to make sense the NEW is in for a tough time, especially out in California.

However, when I find myself tryring to make sense of things, I'm usually in trouble.  

Example:

In mid-March, the DJUSHB (U.S Housing Index) was at about 900, and was on its first leg of a Bearish Rising Wedge (see chart that I posted in the shorting folder).  That index fell to 618 this week, for roughly a 30% decline.

It would seem to make sense that a stock like NEW would decline in tandem, or at least decline somewhat.

It didn't.  

NEW actually had a DOUBLE Bullish Inverse H&S breakaway gap higher on March 15 that put Target: 55.68 IN PLAY, and NEW still is up about 10% from its March breakout.

Although that target hasn't MADE, it's still IN PLAY because, despite the recent H&S Top breakdown, NEW hasn't broken below the neckline of that March breakout.  

NEW held this week above that neckline breakout, and also held above its 200DMA.  That hurts the case for shorting it.

Next, we'll look at the weekly chart.

[Melf Elf]

nullzero,

The weekly chart really doesn't make sense to me, given what the fundamentals would seem to indicate (lower prices).

When I first looked at NEW, I looked only at the recent break of the H&S Top (we'll look at that chart next), and it looked like a great short candidate.

But, let's look at this weekly chart, as though we didn't know what stock it was.  Does it look bullish or bearish?

 

I think we'd agree, that given the "nested" Bullish Inverse H&S patterns, if that neckline at 54.00-51.97 gets taken out to the upside, NEW should head a good bit higher.

Are they only in mortage lending?  In California?  I'm wondering if NEW has any other source of revenue, since this chart looks so bullish.

 

We'll look at the recent H&S Top next.

[Melf Elf]

nullzero,

This is the chart that I was looking at when I liked NEW as a short candidate, prior to looking at the weekly chart, and seeing the Bullish Inverse H&S breakout.

The break of this H&S Top put Target: 36.67 IN PLAY, but that's now ON HOLD since NEW is back above the neckline.

If you read my "BEN - I Smell A Rat!" thread, BEN got back above its broken neckline twice, then tanked to its H&S Top target, which MADE, so NEW could do the same thing here (break back below the neckline, and tank).

In fractal fashion (repeating pattern), just as NEW had a "nested" Bullish Inverse H&S pattern within the larger Bullish Inverse H&S pattern prior to the March upside breakout, the Right Shoulder of this Bearish H&S Top is a "nested" Bearish H&S Toip.  The neckline is the dotted red line on the chart. which comes in today, June 16, at 46.39.  That "should be" resistance.

Resistance:

1. 46.39 - That's where the neckline (dotted red line) of the H&S Top in the Right Shoulder comes in today, June 16.  It rises .0725 each day.

2. 47.26 - The 50DMA, which has rolled over to the downside.

3. 48.98 - The high of the Right Shoulder

4. 51.97 - The high of the Head, and also the second data point of the neckline of a possible 17-month Bullish Inverse H&S pattern (seen on weekly chart above).  If 51.97 gets taken out to the upside, I'm going LONG this stock.

 

Meanwhile, I have to give some more thought to whether or not I want to short it.  I'll post you if I do.  Good luck with your short!

[nullzero]

Nice charting melf... its the div. that is supporting NEW what people dont realize is the DIV is heavy based off the earnings since its set up as a REIT. When the DIV starts dropping NEW will drop like a rock its only a matter of time... We are very close to the top in NEW I think and im sure it will be easy money very soon. I would probley update the stop and ride NEW to the ground. I dont know any price target yet I would say anywhere between 6-25 would be a mid-long term short target... When the real estate market wasnt so inflated and back to pre real estate buying frenzy days. It looks like we are at the end of a real estate boom cycle and I could only imagine the mortgage lenders will be feeling it soon... you can tell the real estate mortgage industry market is over saturated when everyone and there mother is a mortgage broker (well at least in california)

also here is some more bad news for the real estate industry and the market in general
http://biz.yahoo.com/ap/060616/skorea_us_fed.html?.v=12

[Melf Elf]

Nice charting melf... its the div. that is supporting NEW what people dont realize is the DIV is heavy based off the earnings since its set up as a REIT. When the DIV starts dropping NEW will drop like a rock its only a matter of time...

nullzero,

Okay, I didn't know that NEW is set up as a REIT, nor did I know that it paid such a big dividend: $1.80/quarter.

The earnings for this year are estimated at 6.82; earnings for next year estimated at 7.03, so the P/E ratio is about 6.5, which is pretty low.  Granted, earnings likely will adjusted downward in a market downturn, but the earnings can come down, say, even to 4.50, so at the current price, that would be roughly a P/E of about 10.  Still not too bad.

1. 46.39 - That's where the neckline (dotted red line) of the H&S Top in the Right Shoulder comes in today, June 16. It rises .0725 each day.

In addition to getting back above the major neckline at about 44.30, New has gotten above that secondary neckline today, at 46.39.  It's showing some strength, getting back above both of those, so I'm going to pass on it for now.

you can tell the real estate mortgage industry market is over saturated when everyone and there mother is a mortgage broker (well at least in california)

That reminds me of last spring, when Playboy's "Miss May" wanted to get into real estate.  That was two months before the top in the Housing Index.  Good Top Spotter.  Or, in her case, should I say "Top Spotters?"

 

[nullzero]

im at a litte over 4% loss right now but still holding tight I believe this will follow the way of the homebuilders.

[nullzero]

have my stop set slightly above the 50 dma so far NEW has owned me  Lets see where this goes hoping the 50 dma will hold with heavy resistance

[Melf Elf]

have my stop set slightly above the 50 dma so far NEW has owned me  Lets see where this goes hoping the 50 dma will hold with heavy resistance

nullzero,

That's a good idea to have a stop loss.  Regardless of our analysis, technical and fundamental, we don't want to lose too much.  It's best not to get our ego involved, and admit to ourselves that the trade simply isn't going well, and to stop it out at some reasonable point, so that it's not a big loss.  You always can short it again if it breaks that 44.30 neckline, like ESLR did, after the Bull Trap.

Take small losses, and "live to play another day."

That said, I hope that NEW tanks for you next week.   

[nullzero]

NEW has pulled back to the 45.80s hit resistance at the 50 dma and moved quickly downward.  Looks good to continue the downward trend.

[nullzero]

NEW slightly down again today looking good . Resistance at 50 DMA seems to be strong and NEW is cutting thru support atm. Only under water -2% now lets see where we go from here.

[nullzero]

NEW ran up in last few days because ex. dividend date. Today NEW closed down -2% now I anticipate the pain tomorrow when the stock goes ex. dividend. With the market looking bearish and the intrest rate increase from the FED looming there is nothing that is going to stop NEW from falling. Holding in there I had to raise my stop in the 48s but I believe I will be rewarded in the next few days.

[nullzero]

NEW trading in the 43s

[nullzero]

My timing was off on the NEW short by about 6 months, but in the end my assumption came out right.

Here is the latest chart of NEW

Last trade: 19.24
Todays change: DOWN  -10.92pts (-36.21%)

[Melf Elf]

My timing was off on the NEW short by about 6 months, but in the end my assumption came out right.

Here is the latest chart of NEW

Last trade: 19.24
Todays change: DOWN  -10.92pts (-36.21%)

Nullz,

I thought of you yesterday when I saw this disaster, and chuckled to myself when I thought about our discussion on NEW last June. 

Actually, your timing was perfect!  You really nailed this one.  Applause.

We began discussing NEW in this folder on June 16.  The H&S Top already had broken to the downside, and NEW was rallying back above it,  into the huge $1.90 dividend at the end of June.

NEW went only a little bit higher into the dividend (48.03), but the 48.98 high of the Right Shoulder, which would have been the stop, never was taken out.

Sideways for awhile, but then down...down...down...

What was difficult for me, as I said back then, was to short a stock that paid an annual dividend of $7.60 and had a P/E of only about 6.  I figured that with fundamentals like that, NEW could handle quite a few bad loans. 

Before yesterday's crash, the Dividend Yield was about 25%, and the P/E was about 5!

At yesterday's crash high of 23.27, the Dividend Yield was about 33%, and the P/E ratio was under 4.  But, anyone who paid that price ended up with a close in the stock of 19.24!  We'll see how that play turns out, but I get the feeling that the dividend will get slashed big time.

As we've discussed so often, "When the technicals and the fundamentals disagree, defer to the technicals, or at least give them strong consideration."

I haven't looked at this chart since our discussion in June, but look where NEW failed at the Bearish Cross of the 50DMA/200DMAs in late September (that probably was another $1.90 dividend pay out).  What a great short, right there.  The high was 42.58.

In all honesty, I still wouldn't have had the guts to short it, with the fundamentals still "appearing" to look so good, but this is another good learning experience for me.

"Play what you SEE...not what you THINK."

Next time, we actually have to PLAY the danged thing.   

Great call, though, Nullz.

[nullzero]

Thanks melf I have to go with my first feelings on a stock. The dividend was a major reason against holding NEW longer and I cut my postion way to early (right when I made a slight profit.) I was underwater for a couple weeks by a good deal and was looking to get out due to the ex. dividend.