Fannie Mae's stock plunged last week on recently released bill, and based on the chart it looks like it will continue its drop. For years it has been unclear what exactly will happen to Fannie Mae common shareholders. The recently released bill aims to address the unwinding of Fannie Mae and Freddie Mac.
On Sunday, the 442 page bill was outlined in its entirety and gives reason for concern. Fannie Mae is clearly at the hands of the U.S. Treasury as the Treasury holds Fannie Mae preferred stock that severely restricts business activities. This conservatorship has led Fannie Mae to issue the statement, ""in conservatorship our business is no longer managed with a strategy to maximize shareholder returns while fulfilling our mission." As far as the ultimate fate of the common share holders, it may be years down the road before legislation is finally passed.
Due to this news, Fannie Mae stock will most likely continue it's trek lower in the short term. On the daily chart of stock symbol FNMA, a bearish engulfing pattern was formed today. This is a strong bearish pattern that will likely lead prices lower to the next layer of support. There is a very strong layer of support at the $3.00-$3.15 price range. Based on today's chart pattern, prices will likely move 15% lower until it finds this layer of support. Whether or not this price range will hold is yet to be seen, and may be based on additional clarity on this bill.