Here’s How I’m Trading PennyMac Financial ($PFSI) (May 20, 2020)


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PennyMac Financial ( NYSE: PFSI ): This is the stock of the company that actually does really, really well. This is a company that has great profit margins and expanding revenue and earnings over the last few quarters; so there is a lot to like about this company and a lot to like about this stock.

I have been tracking this, it’s on one of my lists of stocks that I keep and then I look at every day and today is the day. The blue line is the 200-day moving average and you can see it’s been capping the stock for a while but finally we get a breakout today. The volume was less than average over the last 50 days but you see all of that volume back there. So let’s change it to 20 days to take out of the equation all of this volume during this big volatile period here. And then suddenly you get volume that is above the typical average volume. Again, just like from the last month or so. This is what we like to see in a volatility expansion trade.

So this is what you are doing; there is plenty of liquidity, almost 800,000 shares traded today, you are buying the stock here on the breakout. And then I would keep a stop a little bit below this 200-day moving average, give it about 6.5 percent, something like that. And my bet is, if you make that trade, you give it 6.5 percent of room on the downside, you are probably going to do pretty, pretty well. Did I just say pretty, pretty well? I know why I said that because you are probably going to make 2 times what you were risking. In other words, you are risking 6.5; I would look for like a 13 percent price target. That’s how I would trade PennyMac ( NYSE: PFSI ).

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