FNM Watch

You've got to love Fannie Mae. Her stock may be on the slide, but she's still a barrel of laughs.

FNM on Thursday pierced the $1.03 level, which was the price that formed the lower bound of a developing pennant.

	trend	adx	psar	pps	macd	macd trend	sto	sto trend
FNM $1.04

The low that day was $1.02. A penny doesn't sound like much, but its still 1% below the line.

I could treat as a just a temporary overshoot, an exception to the rule, made more extreme by the fact that 1% is the smallest possible move for this stock, and therefore the pennant is still in place.

A pennant is a continuation pattern, with both the upper trend line and the lower trendline meeting someplace in between. "Continuation" means that once the trendlines meet, the price continues in the direction it was going. In the case of FNM, a pennant at this point is a bullish pattern.

I hate to make arbitrary exceptions, though. Another view would be that the $1.02 level is setting up the base of a descending triangle, which is a bearish continuation pattern.

In a descending triangle, the upper trendline is moving lower, and the lower trendline is flat. Once the upper trendline reaches the lower, then the price of the stock would go lower under this pattern.

The fact that the stock is today trading above $1.03 adds to the ambiguity.

Which is the correct interpretation? Well, you pay your money and take your choice. It could be the first, or the second, or neither.

That's what makes Fannie Mae so much fun.

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

• trend: green for up, red for down, yellow for sideways
• adx: orange for above 30-up, blue for 20-down, purple for in the middle. Orange 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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