Tuesday, August 23
Chat Transcript: Have the Homebuilder Stocks Peaked?
Many thanks to those who came to the chat last night. We concluded that the real estate-related stocks have definitely maybe put in The Top. ;-) We also reviewed a couple of day trades for kicks. Here's the complete transcript:
Posted on August 23, 2005 at 8:00, GMT
| Zoomie | Hi all |
| james | sup zoom |
| Zoomie | not much, yerself? |
| jfra | howdy all.. |
| Zoomie | hi |
| james | chillin |
| james | mao - i guess your a celebrity - dont worry - your secret is safe with me |
| james | WTG brother |
| CMaoxian | celebrity? |
| james | modesty has always been yer hallmark |
| Zoomie | lol |
| CMaoxian | are there an unusual number of for sale signs in your neighborhoods? |
| james | no |
| SALLY | YES |
| james | its been pretty steady down south |
| james | cant really gauge a drop off yet |
| CMaoxian | i keep getting reports from friends on the coasts that they can't go three feet without running into a for sale sign |
| CMaoxian | where do you live, sally? |
| SALLY | houston, tx |
| nickm | good evening traders! |
| james | well mao - thats been the case in NC for the past year |
| jfra | james, lots of houses for sale in NC? |
| james | yes |
| CMaoxian | are they selling or just standing there? |
| james | they're eatin em up like they're eatin at the wafflehouse |
| jfra | hmm... |
| SALLY | they are standing where i live. |
| james | they are selling - depends on location - as always |
| CMaoxian | well the Housing Index doesn't have an ETF, so there's not an easy way you can play them as a group |
| CMaoxian | so we'll look at a REIT ETF (commercial) and a handful of homebuilders (residential) |
| CMaoxian | here's a weekly chart of the IYR (Dow Jones US Real Estate ETF), let's review the state of commercial real estate before moving on to look at the homebuilders |
| CMaoxian |  |
| CMaoxian | you can see that since 2004, there have been three separate times "technicians" have called a Top |
| CMaoxian | welcome sara |
| james | 38% fib study has a bottom around 56, weekly, 02 bottom |
| Sara | ty |
| CMaoxian | so maybe calling a top here will prove to be premature once again |
| CMaoxian | drilling down to the daily chart, let's look at this last break in the IYR |
| CMaoxian |  |
| CMaoxian | you can see how violent the break was this last time |
| Zoomie | a classic hole in the wall |
| james | no trend just crashes - theres always late comers |
| james | im not sayin further highs |
| james | but there will be support |
| CMaoxian | i agree james, that's why i'm not sure if "The Top" is here yet |
| CMaoxian | you can also see how price broke down out of the little bear flag that formed recently |
| CMaoxian | so this sucker bears close watching at the very least (pun intended) |
| james | im with you - been waitin for a phat panic to get long these builders |
| james | but thats me |
| CMaoxian | speaking of the homebuilders.... |
| nickm | what is "phat panic"? |
| james | blood in the streets |
| Zoomie | when my mother in law is late for dinner |
| nickm | you mean when you are late :) |
| jfra | lol |
| CMaoxian | here's Hovnanian's chart, the hardest hit among them: |
| CMaoxian |  |
| james | 55 - im all in |
| james | even if its for 3 pts |
| jfra | nice chart CM |
| CMaoxian | HOV has broken hard, all the way back down to the highs earlier this year which are acting as "support" |
| jfra | i see 55 gap |
| james | subdivision where i live close to |
| james | for the past 10 years they've sellin lots |
| james | now - now |
| james | they have a "closeout" |
| james | the builders know |
| CMaoxian | next is DR Horton, builders of the Prairie Palace |
| CMaoxian |  |
| CMaoxian | all the homebuilders charts are similar of course, i'm just featuring the hardest hit |
| jfra | curious to fib #'s on these |
| james | fibs are alway subjective |
| CMaoxian | the weekly trend on all these puppies remains UP at the moment, despite all of the daily trends having turned down |
| james | i was lookin for a panic in these today |
| james | no dice |
| CMaoxian | next up is Centex: |
| CMaoxian |  |
| chud | how do you define the trend, cm? |
| CMaoxian | Fuzzy defines it for me, which is of course proprietary, lol |
| CMaoxian | but you can use something like price being above or below both the 20 day and 50 day exponential moving averages, which is about as simple as it gets |
| chud | i'm gonna have to get fuzzy drunk one of these days and try to get some secrets outta him |
| james | hey chud - i'll buy |
| james | what are the odds of a break of that previous high? - thats a buy - short term |
| CMaoxian | hi foo |
| foofighter | hi CM |
| CMaoxian | last homebuilder chart to consider is my favorite, Toll Brothers |
| CMaoxian |  |
| james | i love TOL |
| james | trading it anyway |
| CMaoxian | you can see that TOL has broken fairly hard too, but hasn't yet returned to the highs set earlier this year |
| CMaoxian | frankly that daily chart looks ugly, but i look at their numbers and think, hrm, they have a great business |
| james | way more down to go - jeff mathews had a great post a few weeks ago bout it |
| james | spot market playin and all |
| james | ty mao for the link |
| CMaoxian | that was a good post by Matthews about TOL, lemme find the link |
| chud | Playing the Spot Market for Houses, by Jeff Matthews |
| CMaoxian | thx chud |
| CMaoxian | one stat that i love to throw out is that most of TOL's buyers have household income above 100K so they're not a skittish bunch |
| CMaoxian | if you read that letter by Gary Shilling that i posted excerpts of, you may have noticed this: |
| CMaoxian | paraphrasing Shilling: the recent leap in the share of income is going to the top 20% of Americans while the other four quintiles' shares keep slipping. |
| CMaoxian | that top quintile is buying TOL homes |
| chud | TOL has fallen right to it's 20 week MA. maybe holy grail? |
| CMaoxian | you can give the grail a shot, chud, and if it fails then you know there's more down to come |
| CMaoxian | i was going to mention that, chud: the weekly grail is something to watch, for its *failure* |
| chud | then maybe try the 20 month |
| chud | one of the holy grails HAS to work |
| CMaoxian | not necessarily, price can slice and dice the holiest of grails |
| james | the thing about the builders - for me is - how can you short them now - after a break that hasnt happend in years |
| james | maybe that is a signal |
| james | k - i get it |
| james | need another rally for me to sell - cant sell down here |
| CMaoxian | so the bottom line is, is this "The Top" for the homebuilders and REITs and the answer is a decisive maybe :-) |
| nickm | keep in mind that tuesday/wednesday THIS WEEK are home sale #, which can move these either way |
| CMaoxian | thx nick, i always think the market has anticipated those numbers by now |
| Zoomie | Bill Cara has an interesting chart on mortgage cashouts |
| Zoomie | Mortgage Cashouts |
| james | and they aint done |
| CMaoxian | frankly i don't know anyone who has cashed out |
| CMaoxian | i think it's still a minor phenomenon, but what do i know. |
| james | mao - you missed a royale rumble with matthews and ceo of OSTK last week |
| james | laughed my arse off |
| CMaoxian | i saw it james, a friend sent it over |
| james | WTF? |
| james | was that for real? |
| james | thats the question i kept asking myself |
| jfra | gotta see Mark Cuban's blog request..can anyone show me how to naked short OSTK..unbelieveable |
| james | oh yeah |
| james | Mao - you heard about PIMCO squeezing the shorts in the Tbond pits? |
| CMaoxian | you sent me the article james, yes |
| james | now thats a lesson in trading |
| james | tout TV (CNBC) has been all over it |
| james | CME has a new mag out |
| james | GANN, LIVERMORE< BARUCH - the legends of BOSOX owner! |
| CMaoxian | anyone have any day trades of note we can review? |
| chud | i dont know about the "of note" part |
| Zoomie | sure |
| Zoomie | ADSK on the 19th |
| james | SNDA - 38.05 on that phat candle day - round 2:30 |
| CMaoxian | i'll grab some data zoomie, and take a look |
| CMaoxian | we'll look at ADSK first and then SNDA |
| TraderMike | sup |
| CMaoxian | hi mike |
| TraderMike | so what's the verdict on housing? a top? |
| CMaoxian | it's a definite maybe, mike ;-) |
| TraderMike | I knew you'd say that |
| Zoomie | might not do this trade again....:) |
| james | nice post today TM |
| TraderMike | thanks james |
| chud | looked like a nice suspect, zoomie |
| CMaoxian | ok where'd you enter, zoom? |
| TraderMike | what ticker? |
| CMaoxian | ADSK |
| Zoomie | I liked the volume, broke out to 52 week highs, but I didn't wait for proper retracement |
| nickm | any chance to post the chart CM? so we all look at the same |
| CMaoxian | yes nick, as soon as zoomie gives me a lil more info |
| chud | what do you mean by proper retracement? |
| Zoomie | went long on 4th 15 min candle, kinda a doji |
| Zoomie | stopped out soon after |
| TraderMike | hard to avoid that with the action in the indices today |
| chud | TM: this trade was on friday |
| TraderMike | ah |
| Zoomie | market was strong at time, then tanked |
| james | wild reversal |
| james | even in the oils |
| james | considering earl didnt have that bad a day |
| CMaoxian | that's not a dummy bar, zoom |
| Zoomie | yes, I see |
| TraderMike | I would have been concerned about it being pinned to 40 for options expiration on Friday |
| Zoomie | no real retracement |
| Zoomie | k |
| TraderMike | which is why I take those days off |
| Zoomie | anyhow, entered 40.89, exit 40.55 |
| CMaoxian |  |
| Zoomie | thanks TM, I follow your blog, not close enough I guess;) |
| james | thats about how i play it zoom |
| james | that might not be what you want to hear - but |
| james | thats my max R |
| Zoomie | lesson I guess is it was not my trade plan |
| Zoomie | jumped the gun |
| james | its hard not to scratch that itch |
| CMaoxian | yeah that's jumping the gun zoom |
| CMaoxian | the good part is you stuck to your stop and took a small loss |
| james | word |
| james | thats kept myself afloat |
| CMaoxian | hi lurch |
| james | it is hard though |
| lurker | Hi, Chairman! |
| chud | it's kept my blowout slow and painful |
| james | i hate it |
| james | i've started scaling - into and out of positions |
| CMaoxian | the tone was kind of lacklustre last Friday, so that didn't help either zoom |
| chud | anybody trade PPCO today by chance? |
| james | ADSK - MAO - what clues would you look for "at that time" - cause, in the moment - that bar looks strong |
| james | just set a stop and play it? |
| CMaoxian | i like to see a retracement, james, or at least some real hesitation; i don't want to be getting long above up bars |
| CMaoxian | ideally you have a swing low to place your protective stop beneath |
| james | word - i hear ya - you like those tiny bars - and then get long above those? |
| CMaoxian | i like orderly retracements, clearly defined swing lows, and yes, narrow range bars are ideal to get long above |
| CMaoxian | let's look at this SNDA |
| CMaoxian | what are the details? |
| CMaoxian | SNDA - date entry exit etc? |
| CMaoxian | i'm looking at SNDA and trying to figure out when it was a suspect |
| CMaoxian | back on the 10th or 11th? |
| chud | TM: does eSignal track number of trades or trade rate? |
| TraderMike | not that I know of |
| james | TM & MAO - what do you scan for - on a real time basis, during trading, - new highs/ new lows or unusual volumer? |
| TraderMike | volume & big % movers |
| CMaoxian | i look at both, james... what are the details of your SNDA trade |
| james | so - do you buy highs and sell lows - cause when i get em on my screen - thats where they are |
| chud | there must be somethng to hide about that SNDA trade |
| CMaoxian | chud did you do anything in the past week ;-) |
| chud | mostly stop outs. |
| chud | stopped out of PPCO today |
| CMaoxian | ok we'll look at PPCO and call it a night |
| chud | entered above the 11:00 down bar |
| nickm | any chance to discuss for a while how to screen for candidates? what people use, tools and criteria? |
| chud | entry above that 3rd inside bar would've been better but i missed it |
| CMaoxian | yowza, what was driving this puppy? |
| CMaoxian |  |
| chud | some kinda drug results |
| chud | it's a pharma |
| CMaoxian | it had quite a little run before 11 AM chud |
| chud | yea, should that have scared me away? |
| CMaoxian | well the 10:15 inside bar was bettah, as you noted |
| CMaoxian | did you lose 30 cents on it? |
| chud | just lost 20. i tightened the stop up a bit when the tone started to turn south. shoulda closed it out for a scratch in retrospect. |
| chud | would you have held the position or closed with a sharp tone change like today? |
| Zoomie | seems like they run the stops at lunch |
| Zoomie | when the volume is low |
| chud | seems like it zoomie |
| james | im out - thanks again CM & TM |
| james | later y'all |
| TraderMike | c ya |
| chud | this one held up better than most thru lunch tho |
| chud | seeya james |
| CMaoxian | well chud this was pretty high risk since there was no retrace to buy into, so i mighta played it a bit more conservatively |
| chud | ok. so you prefer swing entries to inside bars? |
| CMaoxian | once the initial risk was covered i prolly would have moved the stop up a tad |
| CMaoxian | it's best when there's a swing AND a nice inside or down bar (for longs) |
| CMaoxian | i *always* prefer to place my stop under clear swings |
| chud | initial risk just barely got covered i guess |
| CMaoxian | right chud, so it's tough to say, prolly woulda been a 30 cent loss |
| chud | and you prefer not so much of an early move? |
| CMaoxian | this sucker went straight up so the more it moves in one direction without a retracement, the more nervous i get |
| chud | i've been looking for smaller gaps after your comments last week. that's what attracted to this |
| CMaoxian | it's a smaller gap and a huge first half hour, lol |
| chud | yea. i like to see them moving during trading hours. seems like a lot gap up and don't have much range during the day |
| Zoomie | wow, what a gap and crap today |
| chud | yep. tough day |
| nickm | CM do u have on your site any description of how to scan, and what tools to use ? |
| chud | he has a few posts reviewing various scanners |
| nickm | must have missed it |
| CMaoxian | RealTick's HotTrend is good, nick |
| nickm | tx |
| chud | expensive tho |
| CMaoxian | i don't know about the TradeStation or eSignal products since i've never used them, but they're prolly OK |
| CMaoxian | in the end, nick, it's best to build one's own |
| Zoomie | anyone use tradestation here? |
| nickm | TS does not have scanner per say.. only can monitor already premade list of stocks |
| CMaoxian | really nick, i thought it scanned the whole market |
| Zoomie | ya, radar screen |
| nickm | no it does not, for sure |
| nickm | i have it |
| CMaoxian | huh, fascinating |
| Zoomie | kinda useless for dummy suspects |
| CMaoxian | kinda useless, period |
| Zoomie | y |
| chud | is there a limit on how many symbols you can preload for it? |
| nickm | 1000 |
| Zoomie | 1000 I think |
| CMaoxian | 1000 ain't bad |
| CMaoxian | but many suspects are gonna slip past |
| lurker | CM, on your charts, what does the 7 mean? Sorry if this was covered before.. |
| chud | lurker: narrowest range of the last 7 bars |
| CMaoxian | the little blue 7's mark NR7's which means the narrowest range bar in the last 7 |
| lurker | Tx! |
| chud | i look at the nasdaq.com premarket most active and %change. that and tradermike's watchlist posts are where i get my suspects. |
| chud | but i'm nobody to emulate |
| CMaoxian | that sounds like a good cheap way to do it |
| chud | yea i'm cheap |
| chud | by necessity |
| CMaoxian | at some point, chud, you may have to open your wallet and buy some tools |
| chud | the trials and tribulations of the homeless trader |
| CMaoxian | got the broadband running into your van, eh? |
| chud | workin on it. public library has a good connection for now. |
| CMaoxian | the librarians must love you |
| nickm | ameritrade has some basic scans like "last hour movers" |
| CMaoxian | back in the Datek days they had some very nice java-based tools that were great for identifying suspects, but i think they all disappeared after the buyout |
| nickm | he just parks next to a WIFI spot :) |
| chud | how much do those scans help you chairman? it seems like most of your unusual suspects were things that moved premarket. |
| CMaoxian | the real-time scans help a ton because the pre-open list often changes dramatically by 10-10:30 |
| chud | it'll make a great story for my future market wizards interview tho - trading homeless to millions |
| CMaoxian | it takes money to make money, alas |
| chud | ok. |
| chud | yea |
| CMaoxian | ok guys, i guess we'll wrap it up |
| CMaoxian | thanks for coming by |
| chud | thanks for the chat |
| nickm | thanks... GN |
| Zoomie | thanks CM!!!! |
| lurker | Thanks! |
| johnd | Many thanks |
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