Thursday, October 28, 2010

NLY Watch

Primo income play Annaly Capital Management Inc. (NLY) came in 7¢ short of estimates when it announced earnings after yesterday's close, and its punishment was a downward gap and a decline that at one point had shares trading nearly 4% below yesterday's close.

Ah, my dividends! Ah, my capital losses. Time to jackrabbit??

NLY $17.38

Many traders have a tendency under such circumstances to grasp at straws, and I'm one of them. After all, a 15.7% dividend yield is hard to throw away. But a dividend yield is nothing if it's wiped out by a capital loss.

I think NLY at this point is a straw-free stock, with nothing to grasp.

The price is trading well below the 20-day moving average. It is still within the 1% envelope of the 200-day moving average, but it's the lower half. The 50-day moving average is still bullishly above the 200-day moving average, so it's a long-term bull play.

But still, NLY's eps was 60¢ this time. A year ago, it was 75¢. That's a huge decline.

Bottom line: I'm closing out my NLY positions until I see some indication that earnings are likely to improve.

No straw-grasping this time. There are too many other stocks that are recovering too waste resources on a real-estate investment trust that has missed its earnings forecast.

The stock next goes ex-dividend in late December, so there will be time to capture the next dividend if further exposure to NLY seems reasonable.

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.

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