I agree with everything you said....except TA being useless....even in this case. That FNM could go to $10.00 there is no question about it. I am only looking into a bounce of $50.00 from a TA perspective. It will be interesting to see....
Well....so far I made over a buck, Trade some, hold some, that's my game plan. It's just a game of probablilities and risk management, that's why I took the trade. Good trading to all! Mike
Foremost, Fannie Mae is the garbage dump (aka secondary market) for the nation's overzealous mortgage lenders. Only good orginations are kept in house. The remainder are bundled and securitized. Silly as it sounds these securities can and do serve as bank reserves. I won't delve into tranches, etc. Point being, the government won't let it fail. It won't be the widows and orphans stock as was in the past, but presently it has BOTTOMED for the time being. Jim Rogers expects it to go to $8. That may be true, but it won't be an overnight process.
FNM/FRE has two business, the portfolio (which they maintain mortgages for themselves) and the so-called guaranty (which is like the insurance against fore-closure) . Portfolio contributes 80% of the revenue. The trouble is that Greenspan and the government want to kill the portfolio business. If they ever success, what is left is the guaranty business, which is a very small part of the old empire.