Bookkeeping: Beginning Discover Financial (DFS) Stake

We mentioned Discover Financial (DFS) a few days ago [Jun 29, 2009: Discover Financial Surges on Analyst Note] - it broke out of a range based on the analyst upgrade and has now pulled back somewhat since my post. I am going to create a starter position (1% stake) as this is one of only about 15 stocks on my entire watch list that is positive today - remember, I hold an inordinate amount of cash and just sold completely out of 1 position and a large batch of another.... hence it's just replacing part of that long exposure in terms of overall portfolio.

I will purchase today at $10.30 and give a generous stop loss of $9.60 (6.5% away) which is below the 200 day moving average in case the market really begins to break down. The 20 day moving average is $9.70s and 200 day right below so we have 2 layers of insurance - if both are broken, then the market has spoken and time to run for the hills.

I have not had time to write up a full post about these things but some of the moves, new minimums, and fees by the banks on the credit card side is making me even more incrementally negative on the US consumer (and I suppose bullish for banks and credit cards) - we are now talking JPMorgan (JPM) requiring 5% minimum monthly repayment (versus 2% in the old days) on some accounts. These type of moves will be debilitating to the US borrower.

As an aside I still have a very small short on, in American Express (AXP) and the chart is shaping up nicely for further downside. So it could be a nice pair trade even if in the same sector, based on charts.


Outside of this the only pockets of strength I can see are the fertilizers based on a price increase in Russia, and a few solar names. Everything else is "1 off" - breadth is horrible.

Long Discover Financial in fund/short American Express; no personal position