| I (RAH) follow
the homebuilding stocks almost daily and I am tempted to nibble
at them but so far I have resisted the urge. Stocks like Centex
(CTX),
D. R. Horton (DHI),
Lennar (LEN),
Pulte Homes (PMH),
and Toll Brothers (TOL)
are well off their all-time highs set in mid 2005, but because they
are on the price downside I am not them buying yet.
What makes them somewhat attractive is that they will turn to the
upside long before the popular press and most analysts start talking
abound a rebound in housing. So called "smart" money will
buy these stocks well in advance of noticeable stock price advances.
Remember that these stocks peaked almost one year before most people
acknowledged that the housing bubble had burst. And the housing
stocks will move to the upside well ahead of any news of a housing
rebound.
So why not buy the homebuilders now? One reason to wait is that
current prices are much higher than those at the start of the upside
in early 2003. So for the complete price cycle to be symmetrical
or nearly symmetrical, prices have much further to go on the downside.
I would like to see prices much closer to the early January 2003
levels before I am confidant the that downside is nearing an end.
Also, I am waiting for the housing optimists to turn bearish and
capitulate. Very heavy volume on down days will be one indicator
to watch.
So for now, I am watching and waiting because sometime soon it
will be time to load up of the homebuilders.
Related Articles:
Homebuilding Stocks
Price Patterns - A
Bubble Top is an Extreme Pattern
Price Patterns
- Support Levels May Constrain Price Downsides
Price Upsides
Often Occur in Three Stages
Posted April 29, 2007.
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