looking at a chart of kbh it looks like a double bottom on both the daily and the weekly, it also looks bottomed out on the monthly, am i crazy wanting to buy a homebuilder here??
Torontotrader do you mind showing me what you are looking at?? for some reason i cant bring myself to initiate this trade even though i know its probably gonna be golden. Here is what im looking at. Torontotrader, i seee where the 35 support is but i think it holds before that, this sector has gotten hammered by abolut as much negative publicity as is poissible. that being said for some reason i cant bring myself to buy the shares, first time in a long time ive been inthis dilemma. edit: sorry my chart should have the bottom support line at 40.00 even
No way. Not a chance. Even if you put a gun to my head. There will be bad news on housing for at least the better portion of 07. At least. Look at KBH's share price in 2003.
lol maybe thats why im having trouble pulling the trigger, however when do we know the bottom is in then??
If there's one thing you need to know as to whether a bottom is in, study permit activity for at least a one year period. Yes, I am serious. Preferably, you should look at permit activity for a longer period of time, to determine whether a housing rebound is in site, because weather, and other 'one off' events can truly distort permits. But if you're serious about investing in a homebuilders, study the permits on a month to month, and year over year basis. When you see consistent and substantial and increasing permit activity, especially of the kind that denotes builders are constructing "spec homes" (speculative homes that have with no buyer as of yet, unlike contract homes), you will have a greater degree of confidence that the housing market is truly improving for the new home builders. Also, look at inventory levels, as they relate to permit activity. So, for instance, let's HYPOTHETICALLY assume permits run way up from October 07 to April 08, on a year over year basis. In other words, permits rise dramatically in September from the previous month, run higher for each month thereon compared to last year, and then a whopper comes out in April of 08, where permits increase 50% from April of 07. We also come to find inventories of new homes are now at 4 month, rather than 8 month levels, and we further discover that builders are seeing heavy foot traffic and increased contract sales. We could then state, with a higher degree of confidence, based on empirical data, that things are improving for the homebuilders.
That gap filled - and more! Homebuilders appear to be trading around their book value now. Wasn't buffet buying into them? Comments on the homebuilders>? KBH looking way back on the weekly chart is holding and bouncing off that weekly support,
Buffett does not buy to trade, he buys to own. Looking at most of the homebuilders may be good for a trade, but I would not pay up, I would wait for the next gap down open to buy for a 10-15% pop, I would then sell calls and use the proceeds to buy puts. These cats are in a secular bear mkt, never forget that
Their book value is the problem. Most of the value comes from inventories. How much are they really worth? In truth know one knows what they are really worth. John