Fannie Mae and Freddie Mac ended their bullish, almost month long run today, with a nearly 50% drop from today's highs, which were also their new 52 week highs.
I got in at the bottom of the move, almost a month ago, with an entry price of $3.07 and $3.20 in my two accounts, deciding that I will hold until the chart or government news tell me that its the time to cash out.
When FNMA gapped up this morning to $6.02 and continued to climb, I was up 94% in one and over 101% in the other account. By 9:45am it started to get tired and reversed, now pulling slowly but steadilly lower. As I will later realize, this is where watching the price action of the stock for months actually paid off. FNMA liked to close gaps. It has done so enough times that I learned not to panic and adjust my (mental) stops accordingly. So when it started going down this morning, it was business as usual. I assumed that it was heading for the gap, considering that yesterday it closed at $5.83 I think, and opened above $6 today. But then a strange thing happened. It somehow found support and bounced of off $6.00 and went up again. There was absolutely nothing on this level except for the end of the fake spike a few days back and todays open, which certainly should not have acted as the support. Whether this makes sense or not, but this move got me suspisious. Since it was moving on high volume (and considerable hype due to blue sky breakout teritory - new 52 wk high), it quickly climbed pass $6.10 - $6.15 - $6.20 levels. Based on its previous move and Fibonacci levels, $6.20 should have been the next resistance. It didnt take long to pass it and just as it was above it, at 10am, I saw somebody share a new news article on $FNMA twitter feed that talked about bi-partisan wind down efforts getting some more traction in Washington. Alarm bells went off in my head. Surprisingly, the stock was still raging, posting new 52 week high with every passing minute. My wife was at work; I had to reach her to make sure she knew of these developments (we both trade/invest separately but this time found ourselves both heavily invested in the same stock - FNMA).
At 10:21am she sold her entire position at $6.28. Moments after, even though the news was already out for almost half an hour, the stock went up further, setting a fresh 52 week high of $6.34. Sitting just of off 5 year high, with unfilled gap under, odd price action and history of ultra violent crashes - I reached my peak of risk tolerance and put in a stop loss at $6.20 which got filled moments later. I was out and quite genuinely sad. I did not like giving up my low entry point as I believed that this stock will continue higher in upcoming days. Minutes later, it was 5% below the high of the day (HOD) and again, inexplicably (for me), stopped itself and bounced from just under $6 ($5.95 or so). This really got me bummed because now I thought - I was just paranoid and got shaken out like so many people before me. Because this is what FNMA would normally do on the days like today - gap up, run a bit higher, sell off quite dramatically until she closed the gap, then continue on a slow and steady grind and by the end of the day and - close GREEN!
She back tracked up to $6.21 or so, spent the next 3 hours there, slowly making lower highs, while bouncing of a very optimistic support line created by yesterday's end of the day (eod) highs and today's lows. Until the right side of the equasion got to heavy for the support line and sent it all down into the abyss. And boy does this girl take a dive.
At 1:06pm FNMA price was $6.06.
By 2:06pm it was $4.54
By 2:39pm - $3.26
Bloodbath.
I hope that all my buddy FNMA longs are alive and well tonight - you're all FNMA veterans and I know you have the stomacks to handle this. Rough non-the less.
Now on my end - good news is - wife is extatic about securing an over 50% gain on a very heavy position. While exhausted from excitement, I am on the doorstep of finalizing my financial goal of setting up a daytrading account (25k minimum) + paying off some cc's and such.
I've been thinking about this for weeks now but I may finally, actually act on it - I want to go ahead and invest in Nathan Michaud's DVD trading lessons. Its pricey (just shy of $1k), but I have a feeling that it will pay itself off in no time. I crossed paths with him on twitter, and he seems to know what he is doing, on top of which he seems like a normal guy. So many of these other guys, while might be brilliant, give me the feeling like they are trying to sell me Mighty Putty or some similar infomercial product. Im not a fuck yeah guy and I dont care for a fuck yeah coach trying to teach me something intelectual. Sports are a different story.
Alright, gotta run. Peace.
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