Friday, October 16, 2009

Bookkeeping: Short Moody's (MCO)

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Thanks to a reader for alerting me to this chart... Moody's (MCO ) is not something on my typical watch lists but it's been in the news a lot of late. There is a lot of headline risk here, and noted hedge fund manager David Einhorn is waging war against the name (the last prominent name he was against was Lehman Brothers). [May 28, 2009: David Einhorn v Warren Buffet on Moody's] Those are not really the reasons for the short here ... first, I need something to try to balance this portfolio out having been stopped out or liquidated many short positions the past few weeks, and second - a low risk entry on the chart.

We'll short here in the $23.20s; and stop out somewhere around $25 if and when. I really like setups like this when an oversold stock rallies right back into resistance. The stock has rallied 8 of the previous 9 sessions after a lot of bad headlines. Probability is, it just goes right back down... if not, we have an very identifiable area to take a moderate loss. Placing a 2.9% allocation on this trade.

Short Moody's in fund; no personal position

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