by Serge Berger | December 19, 2013 8:35 am
U.S. home-builder Lennar Corp (LEN) reported its fourth-quarter results on Wednesday before the start of trading. The company’s earnings per share of 73 cents came in above the consensus of 62 cents. Top-line revenue of $1.92 billion also came in above the $1.88 billion consensus.
On top of this 30% year-over-year increase in earnings, the company noted that deliveries of homes increased by 27% to 5,650. Sales in the quarter were up 42% to $1.92 billion, which was above analyst estimates for $1.88 billion. Wednesday’s earnings report completed the eighth straight quarter of double-digit sales and earnings growth for LEN stock.
To top this off, the Commerce Department also reported that housing starts rose 22.7% last month to a seasonally adjusted annual rate of 1.09 million units. The number is the highest since February 2008, came in well above expectations and is the best monthly percentage gain in almost 24 years. Combine this with the FOMC’s further reaffirmation of its accommodation monetary policy and Wednesday was a perfect cocktail to rally the home builders.
As a result of all of this, LEN stock pumped higher to the tune of 6.34%, closing above some key multi-month and near-term technical levels.
On the multi-year view, after cratering into its 2009 lows, homebuilder stocks rose but didn’t rally steeply until the autumn 2011, which ultimately resulted in the stock bumping into its important 61.80% Fibonacci retracement in May 2013. I often discuss this important Fibonacci retracement level, because more often than not — particularly on the longer-term time frames — it offers a last line of support/resistance.
Since May, when interest rates began to rise, LEN stock has effectively begun to consolidate some of its big run-up of recent years, which is nothing but constructive on just about all time frames.
On the daily charts, Wendesday’s rally in LEN stock took it cleanly past its downward-sloping 200-day simple moving average (red line) as it gapped up right at the start of trading. The stock did attempt a re-test toward Tuesday’s closing levels; however, that quickly reversed as the stock closed near its highs for the day.
From here, with LEN stock not yet terribly overbought and most momentum oscillators again pointing higher, LEN looks to be well on its way toward a meaningful breakout past multi-month resistance around $37.80, with a next upside target closer to the $40 area.
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Learn more about the strategies Serge Berger uses to create profits in the market every day. Download his trading plan in the Essence of Swing Trading e-book by clicking here. As of this writing, he did not hold a position in any of the aforementioned securities.
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