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The drama in the housing market seems to continue to play out in slow motion. While just about everyone has finally admitted that the housing industry is in the middle of a post-boom recession, even a busted bubble, the debate continues on how much worse the decline will get and whether this decline will take the rest of the economy with it. The current strong rally in the stock market indicates that traders and investors have chosen to ignore the woes of the housing market. And, in turn, this market rally is helping to keep a lot of housing-related stocks on life support. Where such benign neglect occurs, you find peril or opportunity. For the past two months, I have been focused on the opportunity - and almost 3 months since I officially called the housing stocks "broken." I have focused on three potential sources of opportunity: 1) playing bounces from "oversold" conditions at or near technical support levels, 2) buying following vigorous selling on bad news, and 3) looking for working theses that can come to fruition over a longer timespan. Of course these conditions are not unique to the housing stocks. But these points of opportunity can turn in large returns in an overall negative environment like the one the housing stocks live in. More importantly, I believe that I have spent enough time watching (and talking about!) these housing-related stocks that I can feel particularly comfortable interpreting the potential for unique opportunities. I will now summarize where things stand today relative to these opportunities (read disclaimer here):
In the meantime, be careful out there! |