PulteGroupís Bearish Breakaway Gap by Donald W. Pendergast Jr.
Shares of PulteGroup have enjoyed a massive runup in
price since October 2011, but a new bearish breakaway
gap is warning of a major reversal in trend.
Home construction stocks are among the more cyclical of
stock industry groups, with some issues able to mount
incredible rallies ó or declines ó in relatively short
periods of time. Hereís a look at PulteGroup (PHM), a recent
high-flier stock from the construction services industry, which
just printed a powerful bearish breakaway gap ó one that is
very likely warning of a substantial trend reversal in the weeks
and months just ahead.
PulteGroup (PHM) achieved a major multicycle low on
October 4, 2011, and after bottoming out at the bargain basement
price of 3.29, the stock went on to soar more than 567%
by January 28, 2013, when it hit $21.97. Thatís a noteworthy
trend move in anybodyís book, but the unexpected arrival of
a major intraday reversal (down by more than 5% in early
morning trading) and bearish breakaway gap may now be
signaling the death knell for PHMís powerful bull run (Figures
1 and 2).
PHM, like many large-cap stocks, tends to spend most of
its time trading within the bounds of its two inner Keltner
channels (red bands); the stockís latest surge upward since
mid-November 2012 was only able to make a few daily closes above the band, with the bears ready to sell short at a momentís