Technical's in effect, are reflection, and quantification of market sentiment. Unlike the occasional divergence between company performance ( the fundamental's ) and stock price, the technical's are directly connected to share price. The challenge, is the accurate interpretation of the technical data. Periodically, almost all technical indicators are clearly aligned, more frequently they are nuanced. The charts of WMC like most MRET’s have been compellingly negative from April 9-May 15. As I have previously suggested in my postings, if WMC could hold the $ 19.90-$ 20.00 support level through the end of this week, I believe the current correction cycle is played out. Full disclosure, I substantially added to my holdings at three of six, pre-determined trigger levels since Wednesday, and have three additional targets in the mid $ 19's, high $ 18's, and lower $ 17's respectively, if the MREIT correction continues. Please note, these are my observations and trigger levels and should be considered as a data point not a recommendation to others. As always, fact based confirming or alternative analysis are welcome.
Eye, I am new to WMC, having purchased my first shares today. I really appreciate your detailed and intelligent analysis of WMC and REITS in general.....step over to the SFL board once in a while and join Mark, Stagg, Max,
and others...we are investors who treasure solid dividend paying stocks...we all invest in REITS, MLP's
Funds, etc...anywhere we can get a good, reliable dividend. All of us would enjoy and value your input.
WMC Update: Stock bottomed @ $ 17.32 on 6/12. Every subsequent day WMC realized higher high's and higher low's on moderately high confirming volume. MACD, while still negative, is trending higher with 12/26 crossing 9 day. Stock broke through 20 day SMA today before a small pullback. As we approach Ex Dividend date in less than a month, the lure of a 5% + quarterly dividend will attracted buyers. Questions about dividend sustainability are addressed in today's Motley Fool posting " if rates go up 50 bps, you should expect Western Asset to report a 2.2% hike in the coming quarter’s net interest income. "
Absent discordant news from the FOMC ( FED ) next week, WMC will likely continue it's upward trajectory. Expect WMC to exceed $ 20.78, 50 day SMA next week and $ 21.31 200 day SMA before Independence day.
Stock is recovering today after reaching yesterday's $ 17.88 low. If this holds, this will be the first up day since May 15. As I previously indicated, if the stock could not hold the the mid $ 19.30's support, a drop to the $ 17's was likely. The next few days are important to determine if the corrective trend has been reversed or is merely taking a breather.
Contextually, rates are going higher. MREIT S/T borrowing costs are increasing, CPR's will likely decline, near term margins will be compressed, until the MREIT's can redeploy assets to higher yielding securities. S/T hedging strategies will either ameliorate or magnify the results.
I am making no judgement on inherent value. The reality is that the MREIT sector, including WMC, has been correcting,or declining if you prefer. Since WMC's April 9 close of $23.72 to today's close of $19.00, is a 20% loss in shareholder value, by most definitions a correction.
Treasury Yield increased from 1.6% to 2.13%, up 33% in the past two weeks. This is largely caused by market expectation that QE...X will " tapper off " this year. During that same period WMC, corrected 13%. WMC is emblematic of the distress in the MREIT stock sector. Concern over MREIT's ability to generate the earning needed to maintain their high dividends, plus the higher yield's on " safe " Treasuries, are weighing on MREIT's.
Update: The 33% increase in the benchmark 10 year Treasury is being mirrored by the 5 year Treasury increase from .64% early May to 1.07%, a 67% rise in rates. The concern is that the MREIT's is, at least temporarily, misplaced on the yield curve. The increasing cost of short term borrowing compresses margins, and places in question their ability to maintain dividends. The stock price is compensating by declining.
Stock technicals for WMC : The 5/13 day EMA and the MACD are weakening at an accelerated pace, the important $ 19 threshold has been broken, and every day the stock continues to register lower low's and lower high's. The next support level is $ 17.36.
WMC continues the correction begun on April 9, but gaining momentum commencing May 15. Stock is a battleground between consolidation around a near term $ 19.09 bottom, and pressure to test the next support of $17.36-$17.46. The three day drop in the broader S&P is creating an additional headwind for the MREIT's
I applaud the quality of your content. If others on this site wish to offer their services as copy editors, fair enough. Please keep giving us first rate information and analysis. Most readers on this message board are literate enough to comprehend your text.
The upcoming vote, in two weeks, by the Financial Stability Oversight Council, on potentially designating some non- banking firms, including MREIT’s, that are systemically risky, is an externality that may be negatively affecting today's share price.
WMC charts are mixed. PPS has not dropped below, May 15 $ 19.56 low for four trading days. This is now a new S/T support level. Weak volume, RSI, and Stochastic's suggest tepid commitment to continuing price decline. If the stock breaks below $ 19.36, all bets are off, the next level is $ 17.36