{"id":1514,"date":"2010-04-26T23:04:47","date_gmt":"2010-04-27T03:04:47","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=1514"},"modified":"2010-04-26T23:04:47","modified_gmt":"2010-04-27T03:04:47","slug":"toll-brothers-potential-short","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2010\/04\/26\/toll-brothers-potential-short\/","title":{"rendered":"Toll Brothers Sets Up A Potential Short"},"content":{"rendered":"

Toll Brothers (TOL) has disappointed market participants with its earnings reports over the past 12 months. For example, December’s earnings generated a one-day drop over 7% that finished eliminating a strong gap up in response to November’s preliminary report<\/a>. However, February’s earnings barely generated a yawn. A week later, the stock resumed an uptrend that has almost gone parabolic in the past week, taking TOL to 8-month highs. This parabolic move has accompanied surging March home sales data<\/a> and multi-year lows in inventory that followed record low sales in February and precedes the expiration of generous tax breaks.<\/p>\n

Parabolic moves are unsustainable<\/a>. When combined with “exciting news”, parabolic moves usually end badly as buying power exhausts itself in a climactic fury. While the momentum is clearly in TOL’s favor here, I am anticipating more downside potential than upside in the near-term. The risk\/reward for a short is relatively good with a tight stop above the recent highs and at least 10% potential downside back to support at the 50-day moving average (DMA) and\/or 200DMA. The chart below describes the set-up.<\/p>\n


\n
\"TOL<\/a>
TOL could be topping out<\/figcaption><\/figure>
\n<\/center><\/p>\n

I have long been bearish on TOL given massive insider sales last year<\/a>. Such sales are typically red flags (like First Solar insiders dumping large quantities of stock around $200 and above<\/a>) of future troubles for the company and downside for the stock. However TOL has shown no significant signs of weakness as it remains stuck in a 3-year trading range. I cannot speculate on any catalyst to break the trading range to the downside, but I remain wary for now.<\/p>\n

The weekly chart below shows that the homebuilder ETF hit 18-month highs today. Its 29% gain for the year far outpaces the S&P 500’s 9% year-to-date gain.<\/p>\n


\n
\"XHB<\/a>
XHB continues to trend upward<\/figcaption><\/figure>
\n*All charts created using TeleChart:<\/strong> <\/a>
\n<\/center>
\n<\/p>\n

Be careful out there!<\/p>\n

Full disclosure: long TOL puts<\/p>\n","protected":false},"excerpt":{"rendered":"

Toll Brothers (TOL) has disappointed market participants with its earnings reports over the past 12 months. For example, December’s earnings generated a one-day drop over 7% that finished eliminating a strong gap up in response to November’s preliminary report. However, February’s earnings barely generated a yawn. A week later, the stock resumed an uptrend that … Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[220,35,62],"tags":[37,36],"class_list":["post-1514","post","type-post","status-publish","format-standard","hentry","category-earnings","category-housing","category-technical-analysis","tag-tol","tag-toll-brothers-inc"],"yoast_head":"\nToll Brothers Sets Up A Potential Short - ONE-TWENTY TWO: Trading Financial Markets<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/drduru.com\/onetwentytwo\/2010\/04\/26\/toll-brothers-potential-short\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Toll Brothers Sets Up A Potential Short - ONE-TWENTY TWO: Trading Financial Markets\" \/>\n<meta property=\"og:description\" content=\"Toll Brothers (TOL) has disappointed market participants with its earnings reports over the past 12 months. 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