Champion Enterprises (CHB)

Company

"Champion Enterprises, Inc. is a leader in factory-built construction, operating 36 manufacturing facilities in North America and the United Kingdom, and partnering with over 3,000 independent retailers, builders and developers. The Company produces manufactured and modular homes through its family of homebuilders, as well as modular commercial buildings for military and commercial applications." (company website)

Buy

10-Oct-06. The stock of Champion Enterprises started a steep slide in May which was slowed, but not stopped, by a report of surging profits in July; but the corner appears to have turned in August (see sidebar). The 50-day moving average has leveled and is on the cusp of turning upward; the 1-month average is already rising. Today it pushed above the upper Bollinger band. While this doesn't seem like exactly the right time to be investing in home-building companies, Champion has the highest profits in the industry and is divesting itself of its retail business.

• Price momentum (PPO) — steadily picking up
• Trend (ADX) — strengthening, and buying pressure (+DI) is picking up
• Money flow (CMF) — steadily improving and now strong inflow
• Relative strength (RSI) — steady strengthening
• Volume — average volume >1 million shares/day

Sell

17-Oct-06. The spike yesterday to $8.48 brought my stop ($0.77) up to $7.72, and it was triggered in today's ugliness. Although it did protect my gain, the gain is trivial.

When I bought in, CHB was quite a ways into its short-term uptrend, but since it was just passing the previous high, I thought there might be a bit of irrational exuberance that would push it a bit farther up before pulling back.

The uptrend is still intact, so I should be able to buy back in after a pullback. Applying the Fibonacci overlay to the chart, a buy may be possible for around $7.50 (see right) However, earnings are due out next week, and that could change everything.