Banking StocksSomeone asked me to take a look at the Countrywide situation. I believe the thinking was that with the subprime mortgage overnight implosion, there might be a spillover effect.
First, for those of you who are reading my blog for the first time and or, are not current clients, I need to briefly explain how I trade so that you can view my comments in the right context.
My orientation to trading which has evolved over the last 24 years, is that I only take loaded or very high percentage trades. This is how I achieve an accuracy of 80% wins to losses. As a result, I establish criteria, and only go in when those criteria are met. This is not to say that there are not other ways to trade profitably, there are. However, to trade and get the results that I require, I need to have this level of discipline.
For stock trading, what I want to see is improving earnings for buys, declining for shorts. I also want low debt, or itleast a declining trend in debt for buys, the reverse for sells. I also want the seasonal tendency to be at the very least nuetral, not against the way I am looking. Then I want a pullback against the trend for entry. I do not care about what I call the "story." The story is the subjective situation surrounding the company that I may have an opinion on. Opinions are to suject to emotional influence, so I stay clear of them when trading.
Countrywide, if we use my criteria, would be a counter trend entry to the seasonal if it were shorted here, so that is not good. Debt is flat, but technically slightly rising, a negative. We are awaiting the recent earnings statement to see where that currently stands, that mark that as an unknown. Also, we are in a current retracement in a flat market, which is a better buy than sell in general.
In summary, this is not set up the way I require for a short entry. This does not mean that this stock will not go down, it is just not a short entry that I would take. If you are playing the story, you need to step in front while it is at a high level, here we are just in the middle of a trading range, so this entry has "poor location."
1 comment:
I know I said I would call but life always is busier than it seems. I have it down in my schedule for next week so it will happen.
I have looked over the numbers of CFC and I agree with you that if you do go short or buy puts you are playing with the story. CNBC's fast money even said look for CFC being over shorted with a dollar uptick it could shoot up four dollars. Maybe a little extreme but they have cut back on subprime and I will be watching their debt because the ABX/CDOs have improved signicantly since their bottom.
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