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 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. 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