Walter Investment Management Corp. provides business services to the residential mortgage industry in the United States. The company operates through six segments: Servicing, Originations, Reverse Mortgage, Asset Receivables Management, Insurance, and Loans and Residuals. 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.
Take a look at the 1-year chart of Walter (NYSE: WAC) with the added notations:
After declining from October into February, WAC has held a very important level of support at $24 (blue) for most of the last 6 months. No matter what the market has done since February, WAC always found support at that level when tested. Now, the stock has approached $24 again, and that could provide another bounce higher.
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The Tale of the Tape: WAC has a key level of support at $24. A trader could enter a long position at $24 with a stop placed under the level. If the stock were to break below the support a short position could be entered instead.
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
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