ANALYSIS: hov

Hovnanian Enterprises is a home builder like KB Homes and Pulte. Basically, it's been tanking along with the rest of the industry. It actually reached $70 at one point back in July of last year, but after a head and shoulder formation, it's been on a downward trend since then.



I'm short on HOV because fundamentally it's lookin bad, and technically it's lookin bad. Fundamentally, the housing market has been slowly deflating since the start of the year. Analysts have been cutting back price targets and orders have continued to decline. Technically, HOV has been in a strong downtrend and the stochastic and macd has recently shown a bearish cross.

HOV has some good things going for it as well. It has been dropping for a long time, and some might think that the slowing house market is already priced into the stock. Also, the short interest, which shows a percentage of the outstanding shares that are short, is at 33%. On one hand, it shows that a lot of people are bearish on the stock. On the other hand, it also means that there are a lot of people ready to cover, which would generate buying interest and cause a dramatic increase in the stock price. I've read of an entirely separate strategy where a position is entered into a stock with a 40% short interest and positive relative strength. Finally, the downtrend is gradually straightening.

Personally, I still think it's got some ways to go down. The housing market just sucks and there's been nothing but bad news about it. Also, the macd and stochastic cross, along with the downtrend, is a strong enough sign for me. However, I'm keeping a tight stop-loss just in case.

Another note: MSN Money had these grades for HOV:
Factor Grades
Fundamental D
Ownership NA
Valuation A
Technical F

I thought that summed it up pretty nicely.

I've been short since 27.20, and although the rise about 5 days ago really scared me, HOV has dropped about 12% in the last four days.

Quick update, LH has been looking pretty hot lately. Even after friday's bear market where i believe 9 out of the 10 major sectors were down, LH showed relative strength with only a .32% drop. It's been up about 6.5% since I posted about it.