Like most traders, I consider anything under $15 to be a bit sketchy, and anything under $2 is in the realm of mad penny stock dreams.
Yet it is in that dreamland where the mortgage giant. No, behemoth. No, colossus, FNM now stands. Just a couple of years ago it was a $70 stock. Today it closed at $1.06.
| trend | adx | psar | pps | macd | macd trend | sto | sto trend | |
|---|---|---|---|---|---|---|---|---|
| FNM $1.06 |
FNM showed a psar bear signal today after remaining in bull mode from Feb. 10 onward. The next downside reversal level is at $1.03, and below that, 0.96 and 0.91. So the signals now point toward a bearish stance.
The Fannie Mae story is too well known to bear more than the sketchiest of repeating: New age bundlings of mortages, housing prices drop, mortgage bundles can't be priced, capitalist finance freezes up, economy moves into recession, Fanny comes under federal control, stock price drops to the cellar.
Given that tale of fear and greed, it's hard to imagine that FNM had $9.3 billion in revenue the last quarter of 2009. Sure, it was balanced against a $2.87 a share loss in that quarter, but that number is 17.3% lower than the quarter before, so the trend is in the right direction.
Moreover, FNM in that quarter had $869.1 billion in total assets, enough the cover the $884.5 billion in liabilities. And Fannie is bringing her liabilities down, by 2.3% quarter to quarter. So the trend is good.
Add to that the fact that FNM is extraordinarily liquid: $41.9 million shares traded today.
The price is volatile -- a 28% rise from Jan. 25 to March 9 -- and as any short-term trader knows, volatility is the mother profit.
The big gotcha is what will the government do. Will they preserve shareholders? Or will they force FNM into some version of Chapter 11, where whatever equity remains is transferred to the bondholders?
That answer remains locked in the heads Tim Geithner, Ben Bernanke and Barney Frank.
So I wouldn't bet the farm on Fannie. Nor would I sock away the shares under my mattress, thinking, along with Warren Buffet, "This is an investment for the ages."
But for a trader who is willing to embrace risk, FNM looks pretty good.
Beginning Friday, I'll be adding FNM to the Watchlist, which is posted about 3 p.m. Eastern each market day, and also following it in the Morningline, which is posted beginning around 10 a.m.
Yes, FNM breaks all my rules. But I find it to be interesting.
Here's a sample of the Watchlist, and the Morningline. And anyone interested can get alerts throughout the trading day via Twitter or on Facebook.
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.
New to private trading? Here's a look at How to Become a Private Trader.
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