FNM Watch

It is in the nature of policy surprises that, like tsunami, they come with little warning. And so it was with the announcement by Fannie Mae (FNM) that it would no longer list its shares on the the major exchanges.

The price opened this morning at 91¢ -- down a penny from Tuesday's close -- and in 35 minutes dropped to 50¢, retraced up to 56¢, and then continued its panic dive down to (so far) 41¢.

Nice ride. And totally unjustified by financial fact.

At the close on Tuesday, the parabolic sar and macd were in bull phase as the price traded day after day within a sideways range.

The closed-source Person's Proprietary Signal alone indicated that something bearish was lurking. It move to bear phase on June 4.

The panic drop today puts FNM back to its low points in February and March 2009, at a level about one-fifth of the swing high recorded in August 2009. The price is now trading 37% above the all-time low of 30¢ set in November 2008.

Was the panic justified? The last time FNM traded at these levels, Barrack Obama had just been sworn in as president, the financial collapse that brought Fannie to her knees was still a smoking heap of rubble, with not even the beginnings of reconstruction in place, FNM's revenues were a fourth of what they are today, operating losses and net income were double today's, Fannie's sheer survival was in doubt.

Need I go on? The company is a far stronger entity than it was last time the stock traded in the 40s. And the delisting from the NYSE and other major exchanges was perfectly predictable. It's in the rules.

So, I think today's panic sell-off is a perfect piece of nonsense. I would not label it a buying opportunity yet -- who knows how far nonsense can go -- but I think smart traders will keep what they've got, and add to their positions when the price again turns up.

(Read more in today's closing post: "FNM Watch: Way Forward".)

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Disclaimer

Tim Bovee, Private Trader tracks the trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.


No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.