PulteGroup, Inc. (NYSE: PHM)

PulteGroup, Inc., through its subsidiaries, engages in homebuilding and financial services businesses primarily in the United States. The company’s Homebuilding segment is involved in the acquisition and development of land primarily for residential purposes within the United States; and the construction of housing on such lands. This segment offers various home designs, including single-family detached, townhouses, condominiums, and duplexes under the Pulte Homes, Del Webb, and Centex names. As of December 31, 2012, this segment had approximately 670 active communities. Its Financial Services segment engages in mortgage banking and title operations. This segment arranges financing through the origination of mortgage loans primarily for homebuyers; sells such loans and related servicing rights; and provides title insurance policies as an agent, as well as examination and closing services to homebuyers.

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

1-year chart of PHM (PulteGroup, Inc.)

The $18 level has clearly been important to PHM, not only as support from February through July, but also as recent resistance (red). In addition, the stock has formed a trendline of support (green) starting back in August. These two levels combined had PHM stuck within a common chart pattern known as an ascending triangle. At some point, the stock had to break through one of those two levels, and as you can see, it was the $18 resistance that finally broke.

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The Tale of the Tape: PHM broke the resistance of its ascending triangle. A long trade could be made on a pullback to $18. A break back below the $18 level would set up a possible short trade and negate the forecast for a move higher.

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