Friday 27 February 2009

Capital One Financial

Pessimism is still l’ordre du jour.
Shorting too.
It is so crystal clear: stock exchanges open up positive and during the day everything is sold. Only just before the close you can have some modest come-back as computers and algorithms take over. How long will this go on?
I wish I knew, but I don’t.
Last November we had a liquidation tsunami caused by trapped funds. This time it is something else: the new way of ‘investing’ in stocks is by shorting them.
But there is a thought I want to share: if everybody is short, than the rally will wipe out a lot of bears.
As an example we mention Capital One Financial (ticker: COF).
COF went from 7 USD to 14 USD in 2 days. Yes folks, that’s 100%. That’s a short squeeze.
Now, this is too fast, as we all know. And shorters are ready to short it again.
Where would you step in? Professionals try to short near resistance levels. Typically a moving average. In this category the 20- and 50-day moving averages are very popular.

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