Lennar Corp (LEN) shares initially rallied over 3% to $48.95 after reporting better than expected second-quarter earnings that beat analyst’s estimates. The rally was short-lived after price made a near two-month high and found resistance from the $49 handle. The second-largest US homebuilder reported net income of $0.95 per share, much higher than the analyst consensus of $0.87. Revenue came in at $2.70 billion, also a beat of the $2.58 billion analyst estimate. New home orders impressed with a 7.96K print, 10% higher year over year.
On the company conference call, they also affirmed 2016 delivery guidance of 26.5-27.0K homes and gross margins between 23-24%.
Price action on the LEN daily chart shows today’s rally tentatively found resistance from the noted $49 resistance level and fell back below the 200-day SMA which currently trades around the $46.86 level. If we continue to see prices slide, further support may come from the $45.00 region. Deeper support may come from the $43 level, it is around that area that price could form a double-bottom pattern.
If the bullish reversal pattern is invalidated, major support will come from the $39.69-41.50 zone.
The Trade: Sell LEN at $46.50, with a stop loss at $47.50 and a take profit at $43.50. The Risk/Reward Ratio is 1:3