Hovnanian's Q1 shows an improvement

How should an investor regard shares of Hovnanian? Well, if you ask me, they're still pretty scary and not for those averse to risk. We still have losses and revenue declines, after all.

However, the comparisons are bound to continue to improve over time. The market is intuiting this. If you look at how the stock has performed, you'll see a very positive trend. Back in March of this year, Hovnanian shares saw a 52-week low of 52 cents per share. Yesterday, the stock closed above $3 at the end of the regular session.

Shares were pressured in the after-hours session on Tuesday after the report was issued. They dropped about 4% at one point while I was writing this. My feeling is that the momentum in Hovnanian will continue and that it might make a nice trade. However, if you're not using risk capital, you maybe should think twice before buying since the stock has bounced back from its low in such significant fashion. The theme in the markets is that the economy will get better and that it's time to start discounting accordingly. Personally, I think many stocks may be overvalued at this point, but clearly the market tape is telling me to lighten up on my bearish stance, at least from a trading viewpoint. Still, if you do decide to look at Hovnanian, approach it with caution.

Disclosure: I don't own any company mentioned; positions can change without notice.