NEW BEARISH Plays

Lennar Corp. - LEN - close: 19.12 change: -0.56

Stop Loss: 20.25
Target(s): 16.75
Current Gain/Loss: + 0.0%
Time Frame: 1 to 2 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
The housing starts and building permit data was bearish this morning. The homebuilder index lost -1.5% while LEN underperformed its peers with a -2.8% decline. Shares have produced what appears to be a bearish double top (see the weekly chart below). I am suggesting bearish positions now with a stop loss at $20.25, just over the 50-dma. Our target is the $16.75 level, which is above the 200-dma. I would keep our position size small to limit our risk or consider buying the puts so you know exactly how much capital you have at risk.

Please note that this is a short-term play. Earnings are due out in late March. LEN could report a week from now but the date is unconfirmed.

FYI: I do want to point out that the most recent data listed short interest on LEN at 21% of the 159 million-share float. That is a high amount of short interest and raises the risk of a short squeeze although we are certainly not expecting a short squeeze with the market in decline.

- Small Bearish Positions -

Suggested Position: short LEN stock @ current levels

- or -

Buy the April $19 puts (LEN1116P19) current ask $1.01

Annotated chart:

Weekly chart:

Entry on March 17 at $xx.xx
Earnings Date 03/24/11 (unconfirmed)
Average Daily Volume: 4.3 million
Listed on March 16th, 2010