Thursday, January 8, 2009
Another juicy short
Homebuilder Lennar (LEN) is about to take a steep fall. I won't be trading this one, but this is a dream short set-up. The reason I'm not going to take the trade is that the options historically have sucked and not provided enough leverage to make it worth the risk and the brokerage account I have money in to make a trade right now (TdAmeritrade) won't let me short the stock outright.
Anyhoo, the chart is a doozy and the top is probably in today. The risk reward on this one is a no-brainer.
An expanding megaphone pattern in JP Morgan (JPM) was used previously to predict a waterfall decline.
Remember, both the up and down swings in a bear market tend to be fast and furious. Profits of 100% in the home builder sector have been made in less than 2 months! A 20-40% drop in the next few weeks would not at all be unexpected. Roller coaster rides like this are no fun for investors, but for those looking to trade, they can be fun and very profitable.