Toll Brothers Inc (NYSE: TOL)

Toll Brothers, Inc., together with its subsidiaries, designs, builds, markets, and arranges finance for detached and attached homes in luxury residential communities. It is also involved in building or converting existing rental apartment buildings into high-, mid-, and low-rise luxury homes. In addition, the company, through joint ventures, is developing a high-rise luxury condominium/hotel project and a for-rent luxury apartment complex. Further, it owns, develops, and operates golf courses and country clubs associated with various planned communities. The company serves move-up, empty-nester, active-adult, age-qualified, and second-home buyers in 19 states in the United States. Toll Brothers, Inc. was founded in 1967 and is headquartered in Horsham, Pennsylvania.

To review Toll’s stock, please take a look at the 1-year chart of TOL (Toll Brothers, Inc.) below with my added notations:

1-year chart of TOL (Toll Brothers, Inc.)

TOL has been trading mostly sideways for the last 5 months. Over that period of time, the stock has formed an obvious resistance level at $35 (blue). In addition, the stock has also created a strong level of support at $30 (red) that has held ever since mid-August, for the most part. At some point the stock will have to break one of those two levels.

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The Tale of the Tape: TOL has identifiable levels of support and resistance. The possible long positions on the stock would be either on a pullback to $30, or on a breakout above $35. The ideal short opportunities would be on a break below $30 or on a rally up to $35.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

Good luck!

Christian Tharp, CMT

Follow me on Twitter: @cmtstockcoach