PulteGroup Stock Rallies on Upbeat Wells Fargo Home Sales Manager Survey

Published on Wednesday, 11 April 2012 14:50 Written by J Hawk

New York, April 11^th (TradersHuddle.com) – The price of shares in Bloomfield Hills, Michigan based new homebuilder PulteGroup, Inc. (NYSE: PHM) climbed sharply today as the equity market reacted to the favorable results of the latest Wells Fargo survey of new home sales managers in 20 major markets.  

The Wells Fargo survey showed that 63 percent of those responding experienced order levels that exceeded expectations. This was the highest result seen since the survey began in 2001. In addition, pricing in March was higher than in February. The survey also expressed hope that the house building sector may actually start to recover in 2012 after making several failed attempts.

The particularly upbeat Wells Fargo survey prompted a notable intraday rally in the major homebuilder stocks, with shares of PulteGroup, D.R. Horton (NYSE: DHI), Toll Brothers (NYSE: TOL) and Lennar Corp. (NYSE: LEN) all posting substantial price gains.  Next week’s key U.S. housing data will now be closely watched for further signs of improvement.

PulteGroup’s stock showed the largest percent gain on the day, probably because the stock was correcting higher after selling off substantially in yesterday’s session. The stock was marked up notably at this morning’s open and subsequently traded as high as the $8.458 level, before retracing some of its gains to trade at $8.31 as of this writing. The homebuilder’s stock is currently showing a hefty gain of +8.06 percent on the day or +$0.62 in active trading of 10.5 million shares on the New York Stock Exchange.

PulteGroup, Inc. Announced Purchase of Centex Corporation

In other recent news about PulteGroup, the firm announced on April 8^th that it would be joining forces with the Centex Corporation in a $1.3 billion stock deal to form the largest homebuilding concern in the United States. The combined company will keep Pulte’s name, headquarters and CEO, although it is expected to cut redundant staff.

The deal will create a homebuilding company that benefits from Pulte’s expertise in retirement home building, as well as Centex’s big share of the first time buyer market. Pulte will also gain large land holdings in Texas, North Carolina and South Carolina, as well as Centex’s homebuilding operations in 29 states.

Pulte’s CEO and President Richard J. Dugas, Jr. was quoted as saying about the acquisition that it “allows us to not only survive, but thrive in any economic climate”.  He will lead the new combined company.

The Technical Picture for PulteGroup Shows Bullish Breakout Followed by Correction

From a technical perspective, PulteGroup’s share price has been trading within what appears to be a long term bottoming pattern. The charts also show a recent corrective upward bias seen since the stock crashed from its peak of $48.23 seen in July of 2005 down as low as $3.29 by October of 2011.

Nevertheless, after breaking through key resistance at the $9.31 level to reach as high as $9.65 on March 15^th of this year, the recent rally reversed sharply lower in what appears to be a zig zag correction that dipped down to $7.65 and appeared to have broken the stock’s supportive up trend line.

After today’s notable rally to $8.31, the stock now appears to have found a good area of support at $7.65 upon which to base a fresh short term corrective rally. Looking forward, provided that the $8.31 support level continues to hold, this stock seems likely to rise to test resistance in the $9.48/$9.65 region, where an upside break would improve the tone considerably.