This is nuts, just like in late 1999/early 2000. DHI numbers and guidance are spectacular. HBs trading on charts and emotions, not reality. According to sentiment, up is down, down is up - these stocks can't be held down forever, can't ignore their strong and growing earnings forever, just as those profitless dot coms couldn't trade on thin air forever. The last time these stocks traded so low on such great earnings, they went on to quadruple in price over two years. Anyone who is "confident" that a chart trend will overcome actual value for years to come is delusional. Earnings do matter, earnings do matter, earnings do matter. These are not Mickey Mantle baseball cards - rising and falling on a whim, these are shares in a profitable business. These are $100 bills on sale for $50, IMO. Maybe the price gets even cheaper in the short term, but time is on the side of the bulls.
Well, S(G)addam Hussein has been the Big Man here, and "agreed" to the UN resolution. As expected (it's soooooooooo difficult to reign in that feisty, independent minded Iraqi Parliament!). Peace In Our Time.
All we are saaaaaaaaaaaaying.
Is give Peace a chance.
All we are saaaaaaaaaaaaaaaaying.
Is give . . .
<<. BV seemed to
work pretty well for these names IF...>>>
We're talking days to cover. BV, PEs, etc. are all LT valuation metrics. While I understand your point is that they can make good targets, generally, even a 10% under/overshoot of these relatively static #s changes the p&l dramatically.
"Never? Never?" There ARE some absolutes: NEVER let your losses run. NEVER short on valuation. Valuation shorts are extra risky: overpriced at 20, then it's 25 (add more?), then it's 30... and then the last margin call...
Short only falling stocks that have a good place to cut your losses. If it isn't falling, don't short it. No one ever made any money shorting into strength... (IMHO)
I dunno, I'm in the James Bond school, I never say never.
I'm pretty ecumenical in my approach, and definitely open to all ideas. BV seemed to work pretty well for these names IF you were willing to understand the extraordinary events (destruction of the long bond, 12 rate cuts, 2 market bubbles) and leave it plenty of room on the upside (e.g., I think RYL got up to 2.5 X BV).
Having said that, we're in agreement: the bible is the chart. All the annual reports, quarterlies, analysts' reports, stockletters and quantitative analysis can't compare with the information you can derive from 3 simple things: price, volume & time.
If we go up a point or so here, it matters little to me. Day before yesterday we has a [pausing] doji. There is no reason to pause unless you're catching your breath for another little run.
I expect to cover in the 51s this week or next. I do not believe I can successfully trade on a point or two pullback.
I'm patient. I think of the current paper profit as a "cushion" upon which I am going to sit my lazy ass.
Also, the general market looks like it is due for at least a 40% retracement from the recent low. Possibly a retest of 7500. And, except for my HI, I lack a more promising ST idea.
We shall see.
The gap @ $58.40 was filled. That was a logical place to cover. Don't expect much more unless the whole market tanks. That's why I bought back the shares I sold (did I "short" my own account?).
<<Another metric would say look to a multiplier of
You should NEVER look to valuation metrics fot shorts (entry/exit). You should ONLY look to momentum, and the charts. If you short an "overvalued" stock, you can see it double, triple even. Short 'em when they're falling. Cover when they stop falling, or hit a loace where they logically MIGHT stop falling. On a valuation basis, BZH is an good BUY. Great PE, great BV, etc. I am short only because the chart looks bad. I am looking to cover at a logical place on the charts, not on the financials.
Another metric would say look to a multiplier of book value. These names can trade from 0.8 X BV to 2.2 X BV. In the Wheezer's case, that would be 46 to 116.
So, 46 might be a solid bottom, unless BV gets revised for some reason.
The chart shows likely areas of 51 (last bounce), 50 (round number support), 48 and 41. As you go farther down you are more likely to find your hard earned profits disappearing, so you have to make some judgments.
Think of this as a watermelon that your friends, the longs, are providing for free. The juiciest pieces are in the middle, the closer you get to the skin the less tasty it is.
Or think of this as a steak, and you're just going to have the juiciest, tenderest part from the center, and leave the outer edge with all that fat for Fido . . .
Or think of this . . .
Why am I so hungry this morning?
I expect it to test the 51.? I will probably look to cover at 51._, on a limit order put in early. Do not see catastophic decline on this leg, or anything dramatic ST. But I do expect a tradable bounce off the old low. (But I will not go longthis under any circumstances.)