Tuesday, October 26, 2010

NLY Watch

The real-estate investment trust Annaly Capital Management Inc. (NLY) has switched to bear phase on Person's Proprietary Signal (pps) after an 11-trading-day bull run that boosted the price by 2.6%. Earnings will be released after the market close on Thursday.


The price today is within 1% of the 20-day moving average, and the macd, although still in bull territory, is trending down. The fast stochastic has thrown off a bear signal and moved into neutrality.

Bear signals this close to earnings might mean a change in trader sentiment, or it might simply be the earnings-risk-averse money getting out, only to return if the news is good.

With a dividend yield of nearly 15% and a return on equity of 11.8%, NLY is an attractive play for traders who like a cash payout along with their capital gains. More than half the stock is owned by institutions, and I am partial to the big dudes having skin in the game.

My tally of analysts shows 63% bullish on NLY.

So there's a lot to like about NLY. What's not to like?

First of all, the stock has been trading within a range for 13 months, roughly $19 on the upside and $17 on the downside, with a major breakout and a major breakdown during that period.

So while the dividends are nice, it's not a stock that's going anywhere fast. Call it an optimism gap, if you will.

Secondly, the stock has been trading at the upper end of the range and is pulling back from that. So the bias is toward the downside.

The high of $18.30 set on Oct. 21 can count as a lower high. A drop below $17.46, on the 200-day moving average, would constitute a lower low, making it a downtrend. So, there are reasons for caution.

On the Person's chart, today's decline has pushed the price below the weekly midlevel.

Person's Table
ppspps openupper pivotlower pivot
NLY $18.10 $18.22 oct26 $18.33 +1.3% $18.01 -0.5%

Upside resistance includes a September high, a downward gap, and then an October high.

Reversal Levels
  • $18.54, +2.4% (Sept. high)
  • $18.30, +1.1% (Oct. high)
  • $18.10 --- You are here.
  • $17.95, -0.8% (20-day moving average)
  • $17.48, -3.4% (200-day moving average)
  • $17.46, -3.5% (swing low)

The 50-day moving average crossed above the 200-day moving average in August and has stayed in bull phase ever since, although with only a shallow rate of climb.

Slow Trading
NLY $17.49 $17.68

On Oct. 12 I wrote this about NLY: "If I were thinking of a new entry, I would want to see the price bump significantly above the 20-day moving average and even bettter, enter the pre-gap trading range around $18.40 and above."

The price fell 10¢ short of attaining my short-term target before turning down. If I didn't own the stock, I wouldn't enter now. but I do own it, so here's my . . .

. . . bottom line: This signal really measures the psychology of the individual trader -- How strong is your fear factor? The nervous trader will jackrabbit out, assuming that the others exiting now have good reason for doing so. The more sanguine trader will stay put, on the assumption that it's only the nervous money getting out and that good earnings will cause a whipsaw back to the bull side.

For my own account, I note that the signal lacks a volume spike, which tells me that it's more a lack of interest than a positive negative vibe that's causing the exits. So I shall stay put through earnings.

If the price were to drop to more than 1% below the 20-day moving average, that would cause me to reassess my decision to stay put.

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.

  • h-a trend - Heikin-Ashi trend.
  • pps - Person's Proprietary Signal.
  • psar - Parabolic Stop and Reverse
  • ma20 - 20-day moving average
  • ma200 - 200-day moving average
  • macd - Moving Average Convergence-Divergence
  • sto - Fast Stochastic

About the glance: The colors indicate the state of each signal.
  • h-a trend: Determined by the Heikin-Ashi candlestick, green for up, red for down. Heikin-Ashi averages six days for high, low and close, signalling uptrend if the close is in the upper half of the range and downtrend if it is in the lower half.
  • sto: green for bull, red for bear.
  • sto zone: green for overbought (80+), red for oversold (20-), yellow for neutral zone
  • psar, pps, macd: green for bull mode, red for bear.
  • macd trend: green for rising, yellow for sideways, red for falling.
  • neutral.
  • ma20, ma200: green for above the average by more than 1%, red for below the average by more than 1%, yellow for within 1% either side of the average.

No comments:

Post a Comment