Lennar (LEN) declined into early 2016 and recovered, but the first-quarter rally has been stymied by overhead resistance in the $48-$53 area. Unless buyers of LEN become more aggressive, we don't expect LEN to be able to push much higher.
In this daily chart of LEN, above, we can see LEN has not made much upside progress the past five months. Prices have traded above and below the 50-day and 200-day moving averages, not showing any clear trend direction. The most bearish indicator on this chart is the On-Balance-Volume (OBV) line, which has been declining since November. A declining OBV line is made when the volume of shares traded is heavy on days when LEN closes lower. Heavier volume on down days is a sign that investors want to get out of a stock. Instead of selling slowly into strength, heavier volume on a down day suggests sellers are more aggressive.
This weekly chart of LEN, above, does not present us with a more positive picture than our daily chart. Prices are above the 40-week moving average, but the slope of the average line is negative. The volume of trading has not expanded on the rally so far this year. The weekly OBV line has a bearish slant to it. In the lower panel, the 12-week momentum study shows a pattern of lower highs this year vs. the higher price highs. This is a bearish divergence and suggests prices may not be able to power through the chart resistance in the $50-$54 area on this chart.
Strategy: If long LEN, I would use a sell stop below $44 to exit any longs.