Chart of the Day: This All-Star Is Waiting for a Catalyst
Strong EPS growth will help buoy the company through a stormy mortgage market.
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The mortgage market is a tough business, only made more difficult when rates are abnormally high.
When examining the players in the mortgage market such as Rocket Companies (RKT), we can understand the frustration their shareholders encounter when the stock just moves sideways for months. Of course, Rocket is a well-diversified firm with revenue sources from various areas, but selling mortgages is their main business. Lower rates help the company sell more and bring dollars to the bottom line.
We tend to tie mortgages to Treasury rates; in this case mortgages are priced off the U.S. 10-year Treasury yield. But this yield has barely budged. If you look at a weekly (not shown here) the 50-month moving average is 4.2% while the 200-day moving average is 4.1%! That is truly remarkable to be so close. Current yields are higher at 4.5%. It is difficult to get refinancings done at those levels along with new mortgages, so Rocket has to wait for rates to drop.
Rocket was recently added to TheStreet Pro Portfolio as part of the EPS All-Stars basket, and the chart is actually very constructive.
MACD is still on a buy signal, money flows, however, are negative but improving, while stochastics have rolled over a bit. Price action is still bullish — candles are teal, which means cautiously bullish. Resistance is at $17.40.
As a member of the EPS All-Stars Rocket Companies does not have a rating.
At the time of publication, TheStreet Pro Portfolio was long RKT.
