WCI Communities (NYSE: WCI), a Florida condo developer struggling to stay afloat, has managed to get through another round of negotiations with lenders without bankruptcy. The company reduced (subscription required) the amount of its credit line and agreed to "increase the pricing of the loans," but few details are available for now.

Billionaire investor Carl Icahn, who owns about 14% of the company, certainly wasn't predicting this mess when he began to acquire shares in the company more than a year ago. The WCI stake has given the legend's hedge funds their first quarterly loss in history.

But WCI Communities impacts the entire industry, not just Mr. Icahn. Yesterday's Wall Street Journal described (subscription required) the shock waves that a bankruptcy would have sent through the housing market: "If WCI is forced to seek bankruptcy protection, it would become the largest publicly traded builder to fail, sending shudders through an industry that has remained largely in the good graces of its lenders."

But with the housing market in trouble, banks simply don't want to take ownership of half-built condos and vacant land. They'd rather play nice rather than risk jolting a housing market that is already more fragile than it's been at any time in recent memory.

John Bollinger is among the industry's most respected technical analysts. In the "Contrary Corner" of his Capital Growth Letter, the advisor suggests scaling into a package of three home building stocks.

He explains, "For this exercise, I've looked at 20 home building stocks, each stock based on its monthly charts. Yes, I know that seems like a sacrilege in the day and age of hyperactive short-term trading, but we are taking the long view here.

"I then looked at the percentage drop from the stock's most recent swing high and then the number of months from the peak to the trough or the present if a swing low has not been established. I then looked to determine if there is a swing low in place.

"After reviewing these 20 homebuilding stock, I've chosen 3 candidates to start. I like the idea of selecting a fair number of small positions that add up to a normal sized position, then eliminating the non-performers as time passes while keeping the winners. We are choosing WCI Communities (NYSE: WCI), Standard Pacific (NYSE: SPF) and St. Joe (NYSE: JOE) as our first commitments."

Each day, Steven Halpern's TheStockAdvisors.com features the latest stock picks and investment ideas from the nation's leading financial newsletter advisors.

MOST NOTEWORTHY: Insituform Technologies, Inc (INSU), Ameristar Casinos, Inc (ASCA) and Christopher & Banks Corp (CBK) were some of today's more noteworthy downgrades:

• Canaccord Adams downgraded shares of Insituform Technologies (NASDAQ: INSU) to Underweight from Neutral following the company's reduced outlook and announcement to exit the tunneling business.

• Prudential downgraded shares of Ameristar Casinos (NASDAQ: ASCA) to Underweight from Neutral on valuation following the recent run-up due to speculation the company will be sold; based on management statements, Prudential believes a company sale is unlikely.

• Buckingham cut Christopher & Banks (NYSE: CBK) to Underperform from Neutral.

OTHER DOWNGRADES:

• ABN AMRO downgraded shares of British Airways plc (NYSE: BAB) to Sell from Hold as the firm believes profits on trans-Atlantic routes may drop from increased competition due to the "open skies" agreement between the European Union and the U.S.

• JP Morgan downgraded China Unicom Limited (NYSE: CHU) to Underweight from Neutral.

• RBC cut Paychex, Inc (NASDAQ: PAYX) to Sector Perform from Outperform.

• Matrix USA downgraded EarthLink, Inc (NASDAQ: ELNK) to Sell from Hold and WCI Communities, Inc (NYSE: WCI) to Strong Sell from Hold on valuation.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

MAJOR PAPERS:

• The Wall Street Journal (subscription required) speculated that Carl Icahn's bid for WCI Communities Inc (NYSE: WCI) may be the start of home-builder buyouts. Other possible LBO targets, according to some Wall Street firms, include Toll Brothers Inc (NYSE: TOL), Ryland Group Inc (NYSE: RYL), Beazer Homes USA Inc (NYSE: BZH) and KB Home (NYSE: KBH).
• The Wall Street Journal also reported that Goldman Sachs Group Inc (NYSE: GS) is looking to push deeper into the subprime lending business at a time when the subprime mortgage market is suffering a "meltdown."
• The Financial Times (subscription required) reported that Cerberus Capital Management, one of the leaders in the bid to buy DaimlerChrysler AG's (NYSE: DCX) Chrysler unit, has signed Wolfgang Bernhard to an advisory contract. Bernhard helped restructure Chrysler five years ago.

OTHER PAPERS:

• The U.K. Times reported that a CVC-led private equity group is planning to bid above GBP9.5B for Sainsbury's plc ADR (OTC: JSAIY).
• The U.K. Times also reported that Cadbury Schweppes ADS (NYSE: CSG) is considering spinning off and selling its profitable drinks business, which includes Dr. Pepper and 7-Up, as a way to defend against a takeover bid for the entire group.

MAJOR PAPERS:

• The Wall Street Journal's (subscription required) "Heard on the Street" column wrote that activist investor Carl Icahn has his eyes set on WCI Communities Inc. (NYSE:WCI).
• The Financial Times (subscription required) reports that BAE Systems Plc. ADR (OTC:BAESY) faces a court challenge from anti-arms groups that want to know how private documents belonging to them ended up in the company's hands.

OTHER PAPERS:

• Aviation Week reported that Iran said it is set to attempt a space launch. There is speculation it could be a cover for Iran testing longer-range missile strike technologies.
• Investor's Business Daily's "New America" column focused on Home Inns & Hotels Management Inc. ADR (NASDAQ:HMIN), China's top budget hotel chain. The company went public in October and is in the midst of a building boom, leasing properties and adding franchises in fast growing cities across China.
• BusinessWeek's "Inside Wall Street" column highlighted three companies:
• The Gap Inc. (NYSE:GPS) recently hired Goldman Sachs Group Inc. (NYSE:GS) to explore strategic alternatives. With sales continuing to deteriorate this puts Goldman Sachs analyst Margaret Mager in an awkward position as she has a "Sell" recommendation on Gap.
• Louisiana-Pacific Corp. (NYSE:LPX) is up from $18 in September to $23.33 now, buoyed by rumors that it's a buyout target and by "signs of a bottoming" in homebuilding.
• Intelli-Check Inc.'s (AMEX:IDN) ID-Check technology has been ordered by the U.S. Defense Dept. and will be embedded in handheld computers used by the Pentagon Force Protection Agency.