If would have completely agreed with you, if you haven't used the term "support above $2.5". Technical analysis is a joke, yet alone using it on FnF.
You're 200% right on the risk reward ratio though.
I just came across this stock as its implied volatility is 402% at the moment for May 15th. I'm guessing there's going to be a big event happening before that. Those $40 calls are trading for $4.50. Wow.
So when that event is exactly happening and is there any chance the result will be postponed?
Technical analysis is a big joke and RSI is the worst of it. If everyone knows about something, then it's not an edge for trading anymore.
This is today's main headline. Soon the main headline will be "Federal Judge Blocks Obama's Executive Action on Freddie and Fannie". Judge Sweeney FTW!!!
Definitely not because of him. Everyone already knew Ackman's stand on the issue.
And when you get smacked, you get smacked BIG. It will sweep all the profits from your small winners.
If you're trying to do swing trading on FnF, it means you're a big noob, because rule #1 of swing trading is to trade volatile, liquid, and cyclical underlyings, which both FNMA and FMCC lack:
1. Volatility: FNMA and FMCC get some volatility from time to time, but they are boring most of the time. They were nowhere close to NFLX, AMZN, TSLA, and other large cap stocks in terms of volatility.
2. Liquidity: They are both most liquid stocks in OTC market, but it doesn't mean they are liquid. Weird bid/ask prices are a commom nature of OTC market. Retail investors are the ones who get burned on those price inefficiencies.
3. Cyclicality: This is the most important one. I think both bears and bulls know pretty well, FnF will either go to zero or $100+. You might have made more than a dozens of profitable swing trades on FnF, but once they start moving in any direction, you will lose more than twice as much as you made during your swing trades. You may think that stop loss order that you place right after opening your trade, may save you. But on the contrary, that stop loss order can cause you to lose your shirt overnight. Any professional trader knows about that.
So don't get too excited about the recent volatility in FnF. I know it's tempting, but the majority of you swing traders will eventually lose. I am a bear and do swing tradings, but I think the only game you can play with FnF is to stay long and patient with them, because its pot odds are your best friend.
People who short FMCC and FNMA are noobs. We just had a big green day and they all freaked out. You can see that by their stupid posts today. If you really believe in you short position, you don't get freaked out like that.
I haven't seen anyone as bearish as myself at the moment. But who on the earth would go short on FnF? How much do you think you are going to make? Go short some stocks that are near their all time highs, such as AAPL, AMZN, NFLX, TWTR, UAL, etc.
We haven't had a rally for a long time. A major one is totally overdue.