PHH Corporation, through its subsidiaries, provides outsourced mortgage banking services to financial institutions and real estate brokers in the United States. The company operates through two segments, Mortgage Production and Mortgage Servicing. The Mortgage Production segment provides private-label mortgage services to financial institutions and real estate brokers; and originates and sells mortgage loans. The Mortgage Servicing segment services mortgage loans and acts as a sub servicer for clients that own the underlying servicing rights; collects loan payments; remits principal and interest payments to investors; manages escrow funds for the payment of mortgage-related expenses, such as taxes and insurance; and performs loss mitigation activities on behalf of investors.
Take a look at the 1-year chart of PHH (NYSE: PHH) with the added notations:
After a massive drop in August, PHH started trading in a somewhat sideways move. During that time, the stock created an important level of support at $14 (red). PHH broke that support in January and declined even lower. Traders could now look for that $14 level to act as resistance if approached.
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The Tale of the Tape: PHH broke a key level of support at $14. A trader could enter a short position on any rallies up to or near $14 with a stop placed above the level. If the stock were to break back above the $14 level, a long position might 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
Follow me on Twitter: @cmtstockcoach