Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

FNM Update



A fellow Minyan asked me to take another look at Fannie Mae (FNM: NYSE) and provide an update. For those who may have missed it we previously discussed the Point & Figure technicals of FNM here.

FNM is off more than a buck this morning and the chart below tells us the short-term level to watch is 66. A print today of 65 would tell us the near-term bearish trend has reasserted itself for the first time since March. According to the chart the next important level of support beneath 66 lies in the 59-60 area.

An expanded view of FNM on a two-point scale offers a better picture of the longer-term trend. Since the stock's all time high in December of 2000 we've seen a series of lower highs and, following the violation of a critical support area in 2002, lower lows. This longer-term chart provides the technical underpinnings of the long-term bearish case for FNM and, because there must be two sides to make a market, it also shows the last straw of hope the longer-term bullish case rests on.

Two things to note on this chart:

· In July 2002, the stock violated important long-term support in the 74-76 area. This was an important breakdown for the long-term bearish view of the stock and, at least so far, has proved to be a serious battleground for the stock, keeping a lid on any upside attempts. Remember, former support will tend to act as resistance on the way up. That has certainly been the case for FNM.

· Second, the stock has so far not formed a lower low this year. The 60 area is, in a technical sense, the last straw bulls can point to in support of the thesis that the stock's worst days are behind it.

I fall into the long-term bearish camp, of course, based on the charts above and the negative short and long-term relative strength readings for FNM. It is my view that this stock has not yet seen its lows. Nevertheless, I believe that if the stock makes a meaningful push back above 76 without making a lower low the bearish case would be in jeopardy, or at least postponed. That is also why the potential violation of near-term support at 66 is something I'm watching carefully. If the short-term trend falls back into line with the longer-term trend, I would expect the test of 60 to occur sooner rather than later.

< Previous
  • 1
Next >
Position in FNM.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Featured Videos