NEW BEARISH Plays

DR Horton Inc. - DHI - close: 19.73 change: -0.55

Stop Loss: 20.55
Target(s): 17.00
Current Gain/Loss: unopened

Entry on July -- at $--.--
Listed on July 08, 2013
Time Frame: Exit PRIOT to earnings on July 25th
Average Daily Volume = 8.1 million
New Positions: Yes, see below

Company Description

Why We Like It:
The last couple of months have produced a dramatic reversal in some of the homebuilders. Investors are worried about mortgage rates. There has been a huge reversal higher in U.S. treasury yields as the bond market collapses. This big rise in yields is lifting mortgage rates. Higher mortgage rates means bigger house payments and homebuyers getting less house for their dollar. There could be a short-term rush of homebuyers trying to lock in rates before they get too high but the trend in mortgages appears to have reversed. Wall Street is worried that higher rates could kill the recovery in housing.

You could argue that DHI is already oversold but the trend is definitely down. Today saw DHI breakdown below round-number, psychological support at the $20.00 level. Today's low was $19.69. I am suggesting a trigger to open bearish positions at $19.60. If triggered our target is $17.00. However, we will plan on exiting positions prior to DHI's earnings report on July 25th.

Trigger @ 19.60

Suggested Position: short DHI stock @ (trigger)

- (or for more adventurous traders, try this option) -

Buy the Aug $20 PUT (DHI1317T20) current ask $1.32

Annotated chart:

Weekly chart: