Homebuilder Lennar (LEN) had a great session on Monday. It closed at a price of $15.14, which represents a gain of over 8%. Volume was quite active, implying conviction in the move.
The one-year chart appears to be a volatile one, but it's in the context of a narrow range. The 52-week low is $11.56, and the 52-week high is $21.79. Does the stock have what it takes to break out of recent resistance levels? Can we infer positive things from yesterday's price change?
According to the Associated Press, the bottom line really rocked. The company reported 16 cents per share of profit compared to a year-ago loss of 97 cents per share. Wall Street was expecting only 5 cents per share.
That's an excellent turnaround. It's understandable why the market was so happy with the stock yesterday. But should one start a position right now in the business?
For me, Lennar is not the kind of equity I would want to be in given current economic conditions. At least not at this price. I would revisit Lennar after a pullback. If the shares got near the 52-week low again, then I might consider a trade. No matter what, you've got to be cautious. As the AP article mentioned, CEO Stuart Miller stated that the summer was difficult for his company; also, from my read of some of his comments, he doesn't seem certain about the short-term prospects.
The rally seemed like an opportunity to capture gains. I'll keep an open mind, though. I'm writing this ahead of Tuesday's bell, so I'll be sure to check out how the price action further develops.
Disclosure: I don't own any company mentioned; positions can change without notice.