PHH Corporation provides business process management services for the mortgage and fleet industries in the United States and Canada. Its Mortgage Production segment provides private-label mortgage services to financial institutions and real estate brokers; originates, purchases, and sells mortgage loans; offers appraisal, credit research, flood certification, and tax services. Its Mortgage Servicing segment engages in collecting loan payments; remitting principal and interest payments to investors; managing escrow funds for the payment of mortgage-related expenses, such as taxes and insurance. This segment also offers mortgage reinsurance to third-party insurance companies; and purchases mortgage servicing rights and acts as a subservicer for clients that own the underlying servicing rights. The company’s Fleet Management Services segment provides mortgage reinsurance fleet leasing and fleet management services, including vehicle leasing, fleet policy analysis and recommendations, benchmarking, vehicle recommendations, ordering and purchasing vehicles, and arranging for vehicle delivery and administration of the title and registration process, as well as tax and insurance requirements, pursuing warranty claims, and remarketing used vehicles; vehicle maintenance service cards to facilitate payment for repairs and maintenance; accident management services; and fuel card programs that facilitate the payment, monitoring, and control of fuel purchases to corporate clients and government agencies.
To review potential trading opportunities with PHH’s stock, please take a look at the 1-year chart of PHH (PHH Corporation) below with my added notations:
After trending higher and higher from December, PHH may have possibly formed a double top price pattern (blue). Double tops are reversal patterns and are as simple as they sound: Rallying up to a point (T), selling off to a support, and then rallying back up again to approximately the same top (T). As with any price pattern, a confirmation of the pattern is needed. PHH would confirm this pattern by breaking the $20 support (red) that has been created by the double top pattern.
Keep in mind that simple is usually better. Had I never pointed out the double top pattern, one would still think this stock is moving lower if it simply broke through the $20 support level. So, whether you noticed the pattern or not, the trade would still be the same.
The Tale of the Tape: PHH may have formed a double top price pattern with a $20 support level. Although a long trade could be entered on a pullback to the $20, the price pattern seems to imply an impending break of support. If that happens, a short trade should be placed with a stop set above $20.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT