FNM Watch: Fibonacci Breakthrough

Fannie Mae, FNM, opened 7.3% above yesterday's close, and moved on up for a new high of $7.36 on the three-month chart, before retracing sharply.

	trend	adx	psar	pps	macd	macd trend	sto	sto trend
FNM $1.23

Altogether the price has traversed 8.8% high to low for a net loss. That is volatility.


FNM this morning announced redemption of principal of several of its securities. The price increase in pre-opening trading came prior to the 9 a.m. Eastern announcement.

In yesterday's FNM Watch, after the price broke above the upper resistance line of a pennant, I speculated on what new price pattern might be forming.

An ascending triangle, which would have continued the move upward after a pause, was a possible interpretation. That possibility has been eliminated by today's rise.

What can be said about FNM at this point is that the stock is in an uptrend that began at $1.02 on April 1, and has since risen by 33.3% over seven days. On only one of those days did FNM fail to set a higher high, and the low was higher on all days.

In terms of Fibonacci retracements, the decline from August retraced 61.8% of the rise from Nov. 2008 (28¢) to August ($2.14), the first recovery after the collapse of capitalist finance.

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Today's sharp rise at the open pushed past the 50% retracement level, and then pulled back to the Fibonacci support.

The Fib levels are:

• Next up: 38.2%, $1.43
• You are here: 50%, $1.21
• Next down: 61.8%, 99¢

I would expect $1.21 to be a fairly decent support level, and a rise to $1.43 to be a possibility (but not a certainty).

Also, usual caveats: FNM is run by a government conservator. It's prone not only to market and corporate news surprises, but also political and policy surprises. So watch your back.

FNM is followed in the daily Watchlist, which is posted beginning around 2:45 p.m. Eastern. Look for it at www.timbovee.com.

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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