Friday, July 17, 2009

Bookkeeping: Rebuilding Shorts in American Express (AXP) and Capital One Financial (COF)

I've held tiny shorts (holding positions) on these 2 names for the past few months; I am going to now expand them after they exploded higher this week on: Goldman Sachs (SLASH) JPMorgan (SLASH) Intel (SLASH) Green Shoots (SLASH) Credit card deliquency data that was poor but some considered a 2nd derivative improvement.

These are not the chart types "stocks below resistance" that we normally target - just two overextended charts (which can of course continue to be even more overextended); both have gaps in the chart, Capital One (COF) a yawning one, and American Express (AXP) a small one.

Obviously today I've taken some profits on the long side, and we tried to short Wednesday but were stopped out of 5 of 6 positions so we're back with little short exposure. I want something, to be hedged. These are 2 staring me in the face.

Capital One will go at $26.40, looking to fill that gap below $23.50
American Express will go at $28.00, looking to fill that gap down around $24.75

Together I am putting 5% of the portfolio combined into this basket; if they rise up from here on their own (i.e. excluding one of these +3% type of Intel days) I am actually going to add to my position not stop out, hence I am starting smaller than usual. Coming into the day they were only a 0.4% type of exposure for us, so we'll have about 5.4%-5.5% short with these 2 by end of day.

That gap at S&P 906 will be filled :) I'll give it within 7 days from here. But I'm open to the possibility we can always go up first. The NASDAQ is working on its 8th straight up day, which is a very rare bird. Aside from Wells Fargo (WFC) we are done with the "big 4" financials and everyone knows the playbook by now. How many times we can keep going up and "be surprised" on the exact same news will be the test...

Short American Express, Capital One Financial in fund; no personal position

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