FNM Watch: Pennant Breakout

Fannie Mae (FNM) broke out of the pennant price pattern that it has been bulding for the past month, touching the high of $1.17 set on March 9 when the pattern began.

	trend	adx	psar	pps	macd	macd trend	sto	sto trend
FNM $1.16

The breakout came on sixth day of an uptrend that carried the price from $1.02, the base at the pennant at the time, up 14.7%.



Today's price action satisfies the requirements of the pennant. It came on an announcement from Fannie that the mortgage company would sell %5 billion in bills on Wednesday.

In terms of future price patterns, if the $1.17 level holds as an upper bound and the existing up-sloping lower trendline also holds, then the pattern can be seen as an ascending triangle.

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This, like the pennant, is a continuation pattern. If May 9 is counted as the base of the triangle, then it has lasted a bit longer than I'd expect for that pattern, so that's a flaw in the interpretation.

If the ascending triangle pattern is indeed valid, then by the book the breakout would carry the price up to $1.35. That is, the $1.17 upper boundary of the triangle plus the 18 ¢ length of the triangle's base.

Whether or not there is a triangle in the works, it is important to note that FNM is not yet in an uptrend. As long as it stays below $1.17, it's a sideways move.

And I'll repeat my usual caveats: FNM has been run by the government since it collapsed along with the rest of capitalist finance. The government angle means that in addition to news surprises, FNM is prone to political and policy surprises.

So caveat mercator!

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: Determined by the 5-day moving average, green for up, red for down, yellow for sideways
• adx: orange for above 30-up, blue for 20-down, purple 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.

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