I'm usually not much for owning homebuilders, but when the stock with the biggest market cap in the group tops the list of my bullish scans for a longer-term view, I'll take notice.
Several names in the space look good, but Lennar (LEN) tops the list here.
My first concern here was interest rates. The long bond has been struggling to hold price recently and rates are creeping higher. So, the first step was to run a correlation between Lennar and the iShares Barclays 20+ Year Treasury Bond Fund (TLT). A quick glance to the bottom of the chart demonstrated there isn't a big negative correlation like some may initially believe. We've actually had a mildly positive correlation more than a negative correlation over the past 18 months. These results demonstrate more of a random relationship than anything. Once I could toss that worry aside, it is time to focus on price.
Over the last year, Lennar has been trading in a bullish channel. The second quarter of the year saw shares pull back, but this has formed a clear cup pattern. The cup was about $8 deep after a run of $18, which puts us square in the middle of a 33-50% retracement, which pegs this as a cup. Of course, we'd like to see a handle form here between $50.50 and $53.30, but we do have a very small one currently. A breakout over $53.50 should present longer-term upside of $8 to $61.50. The timing on this move would be 4-6 months, so this is a longer-term view.
Price is above the 8- and 21-week simple moving averages, with the 8-week crossing back above the 21-week moving average. The intermediate term Vortex Indicator and longer-term MACD are both crossed over from bearish to bullish this week as well. Price isn't quite at a breakout, but if we see the MACD and Vortex Indicator hold bullish come July monthly options expiration (this Friday), then I would operate under the thesis those indicators will lead price. The tough part is the fact the overall market will have an influence, but if we do see a broad market recovery then I would expect Lennar to outperform the broader indices. This one looks to be setting up for a buy this week.
If Lennar isn't for you, two other bullish weekly charts to scope out are Facebook (FB) and Williams-Sonoma (WSM). WSM reminds me a lot about Restoration Hardware (RH) and I see those as two very ownable names here if your view is beyond a few weeks.