During Tuesday's "Lightning Round" segment of Mad Money, one caller asked Jim Cramer about homebuilder Lennar (LEN) : "This market is angry, so this stock needs to come down," was Cramer's response. We reviewed LEN on August 26 and recommended, "Traders could go long or add to existing longs on strength above $111. Risk to $99. The $140 area is our price target."
Prices did not even push above $110 so should be flat or stopped out of old longs at $99.
Let's see what has changed.
In this daily bar chart of LEN, below, we can see that prices turned weak in September and have closed below the 50-day moving average line. The rising 200-day moving average line intersects just below the market around $94 and we could see a test of this lagging indicator in the weeks ahead.
The On-Balance-Volume (OBV) line has turned lower telling us that traders have become aggressive sellers of LEN. The trend-following Moving Average Convergence Divergence (MACD) has just crossed below the zero line for an outright sell signal.
In this weekly Japanese candlestick chart of LEN, below, we can see a small double top-like pattern around $110. A weekly close below $90 would complete this pattern and open the way to further losses. The pattern is not particularly big so a life-threatening decline is probably not in the cards.
The weekly OBV line and the MACD oscillator are pointed lower.
In this daily Point and Figure chart of LEN, below, we can see that the software is projecting a potential downside price target in the $85 area.
Bottom line strategy: The charts of LEN have weakened and are still pointed lower. Stand aside for now. Let's see how the charts look in the fourth quarter.
