FNM Watch

Fannie Mae (FNM) is trading entirely below the lower trend of a symmetrical triangle that began formation on April 12.

The parabolic sar is showing a bear signal, bringing in line with a Person's Proprietary Signal of four trading days prior.

	trend	adx	psar	pps	macd	macd trend	sto	sto trend
FNM $1.21

By the book, the triangle price pattern has been broken. I've always been suspicious of price patterns, and have peppered my reports on FNM with caveats and doubts, most recently in a Sunday post.

More than any other technical indicator, price patterns are exercises in pure psychology. If a triangle is forming and behaves the way traders expect them to behave, then it's the trader's expectations that cause that behavior.

There are no unknown magical forces in the markets: Just commodities, bids, asks and traders.

The lower trendline was constructed from the low of April 12 and that of April 22, the next significant reversal.

Now, an unscrupulous technician would reset the line so the lower trend touches the low of April 12 and that of today, but I think that's dishonest. Trend lines must run from the starting point to the next significant reversal, and never skip to a later reversal.

Today's low of $1.20 returns the price back to the low of April 27, just a few days ago.

Power levels:

• $1.32, +9.1%
• $1.27, +5.0%
• $1.21 <== You are here
• $1.18, -2.5%
• $1.10, -9.1%

Martin Pring's detailed deconstruction of the economic cycle: What sorts stocks to look for at each stage of the recovery. A masterful analysis.

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The Investor's Guide to Active Asset Allocation: Using Technical Analysis and ETFs to Trade the Markets

Martin Pring's detailed deconstruction of the economic cycle: What sorts stocks to look for at each stage of the recovery. A masterful analysis.

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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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