Shares climbed as high at $53.75 within the first few minutes of the open, but have since embarked on a quick pullback. While Lennar stock is still higher on the day, the action is disappointing for investors.
That's particularly true, given the results.
Earnings of $1.30 per share blew by consensus estimates of $1.15 per share and grew almost 40% from 94 cents per share in the same quarter a year ago. Revenue eked out a 2% year-over-year gain to $5.6 billion as sales crushed analysts' estimates by more than $400 million.
New orders climbed 1% and margins increased notably. Gross margins on home sales came in at 20.1%, a near-20% improvement from the 16.8% gross margins achieved in the same quarter a year ago. Operating margins went from 8.2% a year ago to 11.6% in the most recent quarter, a 41.4% improvement.
Despite the strong report, Lennar stock is not getting much of a lift, nor are its peers like Toll Brothers (TOL) - Get Report and KB Home (KBH) - Get Report , which are roughly flat on the day. What's wrong with the stock?
Trading Lennar Stock
There's one level that's really standing out to me on the charts for Lennar stock: $54.
For whatever reason, LEN stock has spent a seemingly abnormal amount of time between $50 and $54 over the past 30 months, as you can see on the weekly chart above. There have obviously been big moves north and south of this range, which is to be expected, but it's hard to ignore this area.
Uptrend support (blue line) had been intact from January through April, but the stock broke down in May. Despite temporarily reclaiming this mark, $54 was simply too strong of resistance to push through and support failed as a result. Despite its solid earnings results, investors again saw $54 keep Lennar stock in check on Tuesday.
Will it ever give way?
For bulls to maintain some form of confidence, Lennar stock needs to hold $52. This is the confluence of the 20-day and 50-day moving averages. A close below this mark is uninspiring to begin with, but threatens to negate the trend of higher lows that's been in place over the last month.
A close below $51 puts the June low of $49.50 on the table. If that fails as support, a decline down to the 200-day down at $47 is possible.
Should the 20-day and 50-day moving average hold as support, perhaps LEN stock can retest $54. A strong push above this mark could trigger a big-time breakout. That may be the case if the housing market remains strong and interest rates come down further.
Either way, let price be the guide.
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This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.