NLY's Bullish Setup with a Dividend Bonus

When a stock offers you a 12% dividend yield, you tend to pay attention. When that same stock shows you two solid bullish patterns on both the daily and weekly charts, well, that’s when you really start taking notes. Annaly Capital Management (NLY) has caught my eye for several reasons, but let’s start with the technicals because they’re lighting up like a Christmas tree.

The Technical Setup: Two Charts, One Bullish Narrative

Let’s start with the daily chart. NLY is shaping up into a classic inverse head and shoulders pattern—one of the most reliable bullish reversal patterns out there. It’s the kind of setup that gets traders excited because it often signals a shift from a downtrend to an uptrend. If we see a clean break above the neckline, that’s your signal that NLY could be gearing up for a nice run higher.

But the real beauty lies in the weekly chart. This is where the pattern expands, showing a large-scale inverse head and shoulders that’s been forming for over a year. When a pattern shows up across multiple timeframes, it adds a layer of confidence to the trade. It’s a sign that the longer-term trend is potentially reversing, and for NLY, this could mean significant upside from current levels.

The Catalyst: Fed Rate Cuts in Play

But there’s more to the story here than just the technical setup. The real catalyst comes from the Fed’s evolving stance. The Fed is signaling that they’re ready to cut rates—something real estate brokers and mortgage firms have been eagerly awaiting. The market is pricing in a 71% chance of a 25 basis point cut and even a 28% chance of a more aggressive 50 basis point cut.

Why does that matter for NLY? Simple: Annaly’s business thrives in a falling rate environment. Lower rates generally lead to an uptick in mortgage originations, refinances, and real estate transactions. That’s the exact business Annaly is in, and it’s why rate cuts could be a significant tailwind for the stock. The combination of a strong technical setup, a fat dividend, and a favorable macro backdrop is setting up what could be a perfect long-term opportunity.

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Options Market is Sending Signals

But there’s more. The options market is flashing a signal that shouldn’t be overlooked. The January 2025 option chain shows an unusually large amount of open interest on the $22 strike call options. This kind of activity suggests that some big players are betting on significant upside heading into the new year. When you see open interest concentrated at a specific strike like this, especially on the call side, it’s a clue that someone is expecting a move.

NLY—A Dividend Play with Catalysts and Technicals to Back It Up

NLY is shaping up to be a strong contender for a position in your portfolio, especially if you’re looking for something that can deliver both income and potential capital gains. With a 12% dividend yield, a bullish technical setup across two timeframes, and the Fed’s rate cuts potentially acting as a tailwind, this is a stock you can let sit and bake while you collect that sweet dividend premium. And with the options market signaling confidence in upside, it’s a trade idea worth keeping on your radar.

Don’t miss out on this one—keep an eye on those key levels and consider adding NLY to your watchlist. This setup offers a blend of technical strength and macroeconomic tailwinds.

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