Despite hitting new highs, it's been a mixed session for Lennar, after the company reported its third-quarter earnings results. Shares initially opened higher, hitting new annual highs in less than 15 minutes, then briefly turned lower and fell to negative territory before recovering.
Given how the chart has set up -- both in the short term and the long term -- investors who are bullish on the homebuilder should consider sticking with the stock. Shares have momentum right now and there's little reason to bet against Lennar unless the trend starts to bend.
Earnings of $1.59 per share crushed estimates by 27 cents, while revenue of $5.86 billion easily topped expectations by $380 million, despite growing just 3.4% year-over-year. The quarter featured impressive metrics as well.
It's left Lennar stock moving notably higher on what was otherwise a weak day in the stock market. Its rally didn't help to its peers, with Toll Brothers (TOL) - Get Report down about 1.5% and KB Home (KBH) - Get Report down 0.83% on Wednesday.
Let's look at the charts.
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Trading Lennar Stock
Above is a daily chart of Lennar stock, which shows the very orderly channel the stock has been in. While difficult to see, the 20-day moving average continues to guide LEN stock higher, too.
Wednesday's action took Lennar stock up to channel resistance. From here, it wouldn't be surprising to see the stock churn higher near resistance or even pullback a bit from here. However, so long as channel support and the 20-day hold as support, bulls have little reason to worry.
Should these two marks give way, though, a decline into the $53 to $54 area could be in the cards. There it faces an important level, as this area was former range resistance.
While the $53 to $54 area is clearly marked on the daily chart, it's much more significant when we use the weekly chart. A move below this area would be a cause for concern, as it would mean LEN stock has broken trend
prior range resistance.
Should the trend break down, bulls will want to see this former resistance mark act as support. If it doesn't, more selling could ensue. Until channel support breaks, though, investors have little to worry about.
This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.