Thursday February 02, 2012
by Bernie Schaeffer, editor Schaeffer's Investment ResearchBased on our "expectational analysis" strategy -- which combines fundamental, sentiment and technical metrics -- I initiated long positions in two homebuilding stocks:
Lennar Corporation (
LEN) and
Toll Brothers (
TOL).
The price action on LEN has been strong, with the equity up over 70 percent since bottoming last October.
The shares recently rallied to a 52-week high and have since pulled back near the 20-day moving average. This trendline could provide support going forward. Despite its strength, sentiment toward LEN is skeptical.
Currently, 20 percent of the equity's float is sold short. Should the shares continue higher, this creates the potential for a short-covering rally.
Price action on Toll Brothers has been strong, with the equity up over 65 percent since bottoming last October.
The shares recently rallied to a 52-week high and have since pulled back to their 20-day moving average. This trendline could provide support going forward.
Despite its strength, sentiment toward TOL is skeptical. Currently 10 of the 15 analysts covering the equity have it rated a "hold" or worse.
This creates the potential for future analyst upgrades. Additionally, short interest on TOL has risen by over 20 percent in the past two weeks. This creates an increased potential for a short-covering rally.
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