Monday, June 29, 2009

Gafisa Technicals Turn Bullish (For Now)




At Stone Fox, we're not huge technial analysts, but this market has gotten to the point that pays to check them out. Gafisa (GFA) has been one of our favorite picks so a while due to booming demand in Brazil for homes due to GDP growth and a huge lack of housing. As of close today, GFA as a very interesting technical setup. We're looking at a rare situation where the 20 EMA and 50 EMA are convering on the 200 EMA from opposite directions so this is about to make a very bullish or bearish move. At a closing price of $16.52, GFA now sits on the bullish side above all the moving averages with the 50 EMA now within reach of making a bullish cross of the 200 EMA. Unfortunately, the 20 EMA has come back down and any turn south could threaten to make this bullish scenario today very bearish. With the underpinnings of the world economy starting to show growth again and China being bullish on all things commodity related it seems so unlikely that a stock like GFA would suddenly turn bearish.

Either way, it might pay to be nimble on this play, but for now we're expecting a breakout to the upside with the chart leading the way to a huge load of hedge fund buying.

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