Many traders will readily admit that the homebuilder companies have been struggling lately and the chart below suggests that it may not get better as quickly as some would like. For today's chart we've chosen to take a look at Lennar Corp. (NYSE:LEN) because the price has fallen below the neckline of a long-term head-and-shoulders pattern, which has been forming since 2003. Traders will use the recent price action to signal a likely reversal of the longer-term uptrend. Technical traders will maintain a bearish outlook on this stock until the bulls are able to step back in and send the price above the neckline ($39.50)
We'd expect the area near the neckline to act as an area of resistance, preventing a move higher. Notice how this level also acted as resistance in mid-2003. This chart is a clear indication of the obstacles that lie ahead for the bulls; it also suggests that the near-term momentum will be downward.