Chart Says This 250% Comeback Stock Has More Gains Ahead

In its heyday during late 2005, homebuilder Lennar Corp. (NYSE: LEN) peaked near $70. In August 2010, and as late as October 2011, the shares could be picked up for around $12, meaning they had shed well over 80% of their value. Since October 2011, however, riding the back of the U.S. housing and homebuilding recovery, the company has roared ahead about 250% to date.

Despite consolidating for more than three months between October and late December, the shares remain solidly above their rising 40-week moving average. The answer for the uptrend is simple: The company has been knocking the cover off the ball for earnings estimates.

Both the technicals and fundamentals say the stock should continue moving higher. From current levels, I expect roughly 20% gains, as I don't think the stock will stall until it tests round number resistance at $50.

Miami-based Lennar was started in 1954, and is now the third-largest homebuilder in the United States. It currently operates in 18 states. Its strongest geographical presence is on the East Coast between Florida and Massachusetts, but it also operates on the West Coast (California and Oregon) and has holdings in the Midwest and far west.

The company builds houses in several brackets such as affordable, move-up and retirees. It focuses on urban, golf course, adult active living and suburban developments. As of November 2011, it owned nearly 95,000 development lots with an option to buy almost 17,000 more, so it won't run out of land to build on anytime soon.

Technically, Lennar's stock chart is extremely strong.

After bottoming at $11.73 in August 2010, the shares rallied to resistance just above $21 in February 2011. Turned back by strong resistance at this level, they headed south, and by October 2011, probed the $12 mark forming a potential double-bottom. Bouncing strongly off this level, they completed an almost two-year base in early 2012, rallying back above the key 40-week moving average, which began sloping upward.  (more)

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