Walter Investment Management Corp (NYSE: WAC)

Walter Investment Management Corp. provides business services to the residential mortgage industry in the United States. The Servicing segment performs services for third-party investors in forward loans, as well as for on-balance sheet residential loans and real estate owned associated with forward mortgages. The Originations segment originates and purchases forward mortgage loans to third parties while retaining the servicing rights. The Reverse Mortgage segment primarily focuses on the origination, securitization, and servicing of reverse mortgage loans and a mortgage portfolio of federally-insured HECMs. The Asset Receivables Management segment collects post charge-off deficiency balances on behalf of third-party securitization trusts and other asset owners. The Insurance segment offers voluntary and lender-placed hazard insurance for residential loan customers, as well as other ancillary products to third parties through its insurance agency. The Loans and Residuals segment is engaged in the provision of assets and mortgage-backed debt of the residual trusts; and the unencumbered residential loan portfolio and real estate owned, which are associated with forward loans.

Please take a look at the 1-year chart of WAC (Walter Investment Management Corp.) below with my added notations:

1-year chart of WAC (Walter Investment Management Corp.)

After slowly selling off from August to February, WAC formed what appears to be a double bottom (blue) price pattern. The pattern is as simple as it sounds: Bottoming, rallying up to a point, selling back off to a similar bottom, and then rallying back up again. As with any price pattern, a confirmation of the pattern is needed. WAC confirmed the pattern by breaking up through the $30 resistance (red) that was created by the double bottom pattern.

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The Tale of the Tape: After trending lower into February, WAC confirmed a double bottom price pattern yesterday. A long trade could be entered on a pullback down to the $30 level with a stop placed under that level.

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!

Good luck!

Christian Tharp, CMT

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