Freddie Mac Trading Notes

When it comes to the cornering of a stock, there are two kinds: those that fail and those that succeed. The essential element that causes the failure is the inability to get the public to "buy in" to the market action. The movement of Freddie Mac (FRE) Monday appears to be on the side of those who are behind the cornering of the stock.

Market activity for Freddie Mac (FRE) was off the charts yesterday, rising $0.49 or 66% in the pre-market session on almost 18 million shares, and rising another 37% on 391 million in the regular hours of trading. This equals a combined increase, from Friday's closing price of $0.74, of 128% (pre-market data below).

Chart Source: Nasdaq.com

There is a distinction between the price movements of FRE and AIG (AIG). Although both are moving on syndicates' pre-market prompting, the FRE cornering of the stock may have the ability to succeed at keeping the price high for an extended period of time. Notice in the chart below that the accumulation/distribution of the stock had gone from the extremely negative low of -319 million (red arrow at point A) to a positive figure (green arrow at point A) based on the activity of today's trading.

Chart Source: Schwab.com

Contrast the movement of FRE's accumulation/distribution with that of AIG. While both accumulation lines hit their lowest point on July 24th, the day after the Dow Theory bull market confirmation, AIG has not yet broken above the accumulation line (red circle.) Additionally, as AIG has gone up in price the volume has trended down.

Chart Source: Schwab.com

The AIG run does not look "sustainable" over the long term unless the accumulation/distribution improves along with a rising price and rising volume. For traders, it is expected that FRE will have a pullback, however there may be legs on this speculation as compared to AIG.

Because we're in a cyclical bull market within an even larger bear market, I would consider these stocks as pure speculation regardless of the "potential" upside. Let's see which of the syndicates that are running these stocks up in pre/post market activity comes out the winner. From what I can tell, the FRE gang is miles ahead of the AIG crew in this race. This should be interesting to watch.

Disclosure: no positions

Comments

[ATWshop:]

I have to agree with Fre Freddie here. The accumulation at this time will be made up mostly of investors looking for a longer term hold of 6 months or more... prices over $2 should be easily obtainable and sustainable with another surge after more profit is made.

AIG is simply being used by all the new day traders as a way to make a quick buck and run back into their rabbit holes...plus the fact that any stock constantly in the news (all the banks) get lots of attention from the uninformed investors. As with the Dot Com bubble we now have a huge number of New Traders looking to get rich quick...they never saw FRE price run up coming. But, then, neither did the main street financial press...Duh!

Aug 11 06:59 AM

[Anthony Alfidi:]

Here's a winning trade for Phoney and Fraudie: walk away.

Aug 11 12:38 PM