Home Loan's Flat Base Sketches Mixed Picture


The chart ofHome Loan Servicing Solutions ( HLSS ) has shown disciplined-looking action since its IPO about 14 months ago.

The stock is working on a second-stage flat base. The potential buy point is 24.19.

A base involves a resting or consolidating area during a stock's advance.

Home Loan's weekly chart might give some investors pause. The pattern shows two down weeks in above-average volume and no up weeks in fast trade. But in the first week of April, the stock closed in the upper 40% of the range -- a sign of accumulation.

The daily chart shows eight down days in above-average volume. Four of the days, though, show closes in the upper 60% of the day's range -- which points to support.

How should an investor respond to this mixed picture?

Two things: First, wait to see if the stock's Relative Strength line can hit a new high before the stock breaks out. That development would be bullish.

Second, insist on strong volume if the stock breaks out.

Funds have been entering this stock over the past four quarters through March. The number of funds holding shares grew from 83 to 107, 172 and 183. The overall stake increased from 4.8 million shares to 12.8 million, 28.1 million and 34.7 million.

Home Loan lost 2 cents a share in 2011, but earned $1.21 a share last year. The Street expects a 52% pop to $1.84 a share this year.

In April, the company set the monthly dividend at 14 cents a share. The next ex-dividend dates are May 29 and June 26 for payouts June 10 and July 10. The annualized yield is about 7%.

Home Loan's goal is to pay 90% of net income in monthly dividends.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

This article appears in: Personal Finance , Investing Ideas

Referenced Stocks: HLSS

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