FNM Watch

Fannie Mae (FNM) is bouncing off of $1.03, the lowest it can go and still preserve an emerging pennant that sets up a price rise once it is complete.

FNM has been trading sideways since the base of the triangle was set with an 18.2% rise on March 9.

	trend	adx	psar	pps	macd	macd trend	sto	sto trend
FNM $1.03

Technically, the psar and pps have diverged, one showing a bull signal, the other a bear. The preponderance of signals is to the bearish side.

Resumption of the uptrend would carry the price away from the 61.8% Fibonacci retracement of its rise from 28¢ in November 2008 to $2.13 in August 2009.

FNM must be treated cautiously because of the high chance of political surprises. The mortgage issuer is under the control of a government conservator and Congress is considering ways to restructure the company.

Although the feds have said they have no intention of liquidating FNM, restructuring typically takes care of the interests of bondholders while leaving shareholders with nothing.

So Fannie at a buck may not be the bargain it seems to be, depending upon how the policy issues play out in Washington.

With the Federal Reserve having gotten out of the business of buying mortgage securities, much of FNM's stability will depend upon the willingness of private-sector investors to purchase its bonds.

Abbreviations:
psar - Parabolic Stop and Reverse
adx - Average Directional Index
pps - Person's Proprietary Signal
ma20 - 20-day moving average
macd - Moving Average Convergence-Divergence
mfi - Money Flow Index
sto - Fast Stochastic   

About the glance:  The colors indicate the state of each signal.

• trend: green for up, red for down, yellow for sideways
• adx: green for above 30-up, red for 20-down, yellow for in the middle. Red is most prone to whipsaws
• psar, pps, macd: green for bull mode, red for bear
• sto: green for overbought, red for oversold, yellow for the neutral zone.