Fannie Mae Price Analysis Powered by AI

Fannie Mae Surges in Blow-Off Top: Massive Overbought Signal – Prepare for a Sharp Retracement

The price of FNMA was trading steadily between $5 and $7 from January 2025 through mid-May. For nearly four months, FNMA acted in a tight consolidation, with several "false breakouts" above $7 and a consistent return to its mean (~$6.50).
Trend Shift: Between 2025-05-20 and 2025-05-22, there was an explosive breakout: volume spiked from ~2M–10M shares to over 71M shares, and the price surged from $7.63 to $11.22 (+47%). This is a textbook example of a parabolic run that frequently ends with substantial volatility, profit-taking, and a retracement phase.
Last Close: $10.99, after testing an intraday high of $11.23 on both May 22 and 23.

2025-05-22: Monster bullish candle, strong close at the day's high.
2025-05-23: Candle with a long upper wick, close below the day’s high, and some downswing in intraday movement ($10.50 open, $10.99 close, $9.84 low, $11.23 high). This forms a potential shooting star pattern or at least a sign of distribution/selling into strength.

Normal volume for FNMA ranged ~2–17M. The recent move was on 71M (May 22) and 26M (May 23)—massive, confirming institutional/fund involvement or speculative surge.
Rapidly increased volume with a parabolic price suggests a blow-off top is forming.
The substantial drop in volume on May 23 (to 26M) post-spike hints at waning buying pressure and profit-taking starting.

Given price doubled in a few sessions, RSI is likely >80 (extremely overbought territory). Stocks rarely sustain such overextensions without a retracement.

Short-Term (5/10/20 EMA): All major moving averages are far below current price, likely clustered around $6.5–$7.8. Price stretched >50% above these, indicating an unsustainable trajectory in the short term.
Mean Reversion Pressure: Severe overextension increases probability of mean-reversion—likely a retracement toward $9.50 or lower.

With this volatility burst, price is clearly outside the upper Bollinger Band (likely set at 2 std deviations). Historically, moves outside this band >30% are followed by rapid snapbacks inside the channel.

Immediate resistance: $11.23 (recent high on both May 22 and May 23—double top intraday)
First support: $9.84 (intraday low May 23)
Strong support: $7.60 (May 20 close / start of the breakout)

For the move $7.63 to $11.23:
- 23.6%: $10.40
- 38.2%: $9.80
- 50.0%: $9.43
- 61.8%: $9.06
It’s usual for such moves to retrace to the 38.2–61.8% level quickly.

MACD: Would show an extreme bullish crossover, but signal line is lagging too far, suggesting divergence risk on reversal.
Stochastics: Almost certainly in the 95–100 range. Overbought.

Huge Gap: Between May 21 close ($7.45) and May 22 open ($10.22). Historically, gaps of this size are filled in 5–60 trading sessions unless driven by fundamental surprises (not mentioned here).

Fast money/crowd traders chased the gap; late entrants are now trapped near the highs.
Early-instinct sellers are profit-taking. The reduced volume and shooting star candle imply buying exhaustion.
Institutional traders typically sell into such euphoria (“smart money exit”).

Absent a fundamental or regulatory change to justify a permanent price floor above $10, the technical structure is unsustainable at this altitude.
Many breakout traders have tight stops—if $10 fails, cascade to $9.80 or below is likely due to stop runs.

ATR (Average True Range): Spiked dramatically; price swings of $1–2.50 per day are likely in near-term—heightening reversal potential.

The current market structure and technical indications strongly favor a corrective move lower over the next 24 hours. The risk/reward does not favor new longs; instead, the mean reversion setup is optimal for a short position (Sell).
Expect at least a test of the 23.6% and 38.2% Fibonacci retracement levels ($10.40 and $9.80, respectively). A full gap fill toward $7.60 is possible but less probable in a single day barring news.
Optimal trade: Open short on any attempt to reclaim $11.10–$11.20, set a target near $9.85 (38.2% retracement, near prior support). Risk manage with a tight stop above $11.35 (in case of news-driven squeeze).

All technical, sentiment, and volatility indicators cluster toward an impending retracement, not further upside, in the immediate term.