WWM - Analytics


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    Today’s Trading Edge: Hovnanian Enterprises, Inc shares plummet after delivering a wider loss


    Hovnanian Enterprises, Inc. (HOV) shares dropped almost 16%, following a disappointing earnings miss and announcement the company will exit some markets. For the first quarter, earnings per share came in at -$0.11 earnings per share, six cents worse than the analyst estimate. Revenue beat with $575.6 million, the forecast was eyed at $566 million. The company also announced deleveraging efforts and the exiting of Minneapolis and Raleigh markets.  

    For 2016, the homebuilder company, affirmed revenue between $2.7-3.1 billion, in line with the analyst consensus of $2.90 billion.    

    Price action on the HOV daily chart shows that price formed a three-drives-to-a-top pattern after reaching the $1.80 resistance level. Following today’s earnings report, price broke below the 50-day SMA, which currently trades around the $1.55 level. Further downward pressure may target the near-four year low of $1.19. If we see another leg lower, price may eventually find support from the psychological $1.00 handle.

    If over the next couple of weeks, we see price stabilize and recapture the $1.72 level, we could eventually see a run towards the $2 region.

    The Trade: Buy HOV at $1.15, with a stop loss at $0.95 and a take profit at $1.75.  The Risk/Reward Ratio is 1:3

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