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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study! -- Ignore unavailable to you. Want to Upgrade?

To: jaytee who wrote (13598)	2/11/2001 6:33:41 PM
From: Herm	Read Replies (1) \| Respond to of 14162

Hello Jaytee and fellow readers and lurkers! SPF UP OR DOWN? Your question is what to do with SPF and to determine the direction of the company. The first thing I do is: 1. Look at the technical chart profile to ascertain any common trading patterns and determine the current market phase the stock is in. So, here we have a weekly and daily profiles: <bWEEKLY I adjusted the BBs slightly to a 12 week and 2.5 Std.Div. which seem to give a "better fit" of the tag points. I can see by the short historical plots a less than desirable history for this company. In other words, they have not been around for too long. Otherwise, we would be able to look back over a 5 to 10 years of history. So, with that said, I see the first red flag of a ski high RSI for this company. coveredcallswins.com[l,a]waclyymy[pd12,2.5][vc60][iUb14!Lg!Lf] OBV is ski high and has been dropping which the stock makes a new high. Another red flag of impeding profit taking. I would guess the market phase could be at best a distribution phase with a potential markdown if other conditions continue as you will read. coveredcallswins.com[l,a]daclyymy[pd12,2.5][vc60][iUb14!Lg!Lf So, from a technical standpoint SPF is not going to hit $35 anytime soon and will need to find a solid lower price support level before re-testing of the high. But, wait! Who has there eyes set on SPF? SPF FUNDAMENTALS SPF only sports a 10% consensus future 5-yr Growth Rate and with a P/E of only 9.5 it is just above a fair value. NYSE: (SPF : $28.00)$869 million Market Cap at February 9, 2001 Trades at a 17% Premium PE Multiple of 9.5 X, vs. the 8.1 X average multiple at which the Home Builders SubIndustry is priced. Home Builders SubIndustry down < 2.19%> / Materials & Construction Industry down < .56> today. For those CANSLIM folks out there! How about some news to make things happen? On or around Feb. 5, 2001 the BEARS put out a short alert on SPF. That will increase the liquidity of the stock and thus depress the stock price if it continues! Well, with the domino effective taking hold in California as the result of the current crisis with the electrical utilities companies going broke, it won't be long before the impact on prices on oil or other companies that need the juice to run their companies. It does not take a rocket scientist to at least think twice about buying a home if you are going to be laid off because of these defensive measures to cut cost. And, I don't have to tell you what a small house cost in California. It is a highway robbery what people pay out there. In Florida a house that cost $70,000 to build would cost $200,000 in California. Thus, the housing market would get squeezed with at least a slow down in new homes. Sure, there would be plenty of inventory of older homes if the bottom falls out and folks have to relocate out of the State. In the stock market, "perception can become reality!" What was said in the article below was that SPF is a home builder heavily exposed to California. In addition to California, Standard Pacific operates in Texas, Arizona and Colorado. The company builds in major metropolitan areas and has been rather a laggard in terms of value creation. Its share price ended the 1990s where it started the decade. To be fair, it is tough to be a public home builder. A private home builder can expand wildly and smartly and often can shrink just as smartly. Public home builders need to keep that perpetual growth face on, and hence they habitually make imprudent decisions that make it difficult for these companies to actually generate any excess free cash flow. coveredcallswins.com SUMMARY My saying about successful investing, "let the trend, be your friend!" I would not be on the long side of SPF except for shorting it or doing the PUTs. But, the open interest in SPF is spotty in certain strike prices.