Homebuilders are ready for a bounce

Babak at Trader's Narrative is cautiously optimistic on homebuilders. Considering the amount of negativity on them, they are primed for 20% plus bounce. I would look at taking positions in GFA, AVTR, BHS, NVR and some more at this levels. No guts, no glory. When there is blood on the street, sometime you find easy money.

If you think the financial sector has been roughed up, check out a long term chart for the homebuilders. They’ve gotten crushed.

NAHB home builders index housing sentimentAlthough it is always most difficult, it is rewarding to step in and buy when no one else is. Right now sentiment and the technicals have reached a crescendo of pessimism that usually signals an inflection point.

Take a look at the chart to the left. It is a survey from the National Association of Home Builders (NAHB) showing that only 28% of them see the housing market as “good or fair”. To put it in perspective, this is the lowest reading in 16 years. Very gloomy. Very doomy. Wouldn’t you say?

And there’s more. An economist with Moody’s economy.com wrote recently, “The bottom of the housing market appears nowhere in sight”. Ouch.


Numerius said...

I disagree that the homebuilders are a worthwhile trade. I dont doubt that at some point there will be a bounce but finding it will be very hard. This to me is like trying to by bounces in telecom stocks during the tech implosion.

QUIKTDR said...

I agree on homebuilders but I would only start nibbling on prospective total position.

When you get an episodic signal do you enter immediately?

I notice many up/down signals in stocks like GS.

Pradeep Bonde said...

EP I enter some immediately, some after a pullback.

Pradeep Bonde said...

Send me your email address.

Jack said...

"DeadCat" bounce?

I don't think I want to pick up that "falling knife". I may miss the first move up but I'll let someone else get the first $$$ or the arrows.

Just my 2cents

Numerius said...

nobodys talking about it much but theres a lot of strength in non-residential construction. Why waste time on homebuilders when the non-res related companies are still breaking out?

Pradeep Bonde said...

Because anti trend rallies in heavily shorted stocks are very ferocious and you can make lots of money in few days time frame.
Look at the mortgage companies. Some of them tripled in few weeks.

Numerius said...

Honestly, i think money can still be made shorting the homebuilders. I dont short personally. These stocks remind me of techs after the crash, way way down but many still remarkably overvalued.

Even if you can buy homebuilder at the exact bottom, i think its likely to just be dead for quite a long time.

We havent seen a capitulation event yet, i would want to see that first for a margin of safety before buying.

QUIKTDR said...


I e-mailed you my address.

Pradeep Bonde said...

Check your mailbox for a email message.