IBN

[David Randolph]

I see trouble for the US stock market, but even more so for the emerging markets because the expectations are extremely high in those countries.

IBN is a $17 B market cap bank with the terrible habit of diluting shareholder's value. The price to earnings ratio is 22.3 compared to Citigroup's PER of just 11.

Technically a runaway gap just occurred with the stock breaking down below an important support with a gap. Everything looks set for a fast $10 or $15 decline.

Trading Plan:

Sell IBN short, 6.66% of capital as always.

[David Randolph]

It will be interesting to see how the Indian market reacts to Friday's Wall Street decline, as emerging markets usually exacerbate the American market movements:



Globalization is great when everything is moving to the upside, but if we think of this way, India will go down because the US went down on Friday, then the US will go down because emerging markets were down on Monday, then emerging markets will go down because of that, the US goes down the next day ... and it creates a snowball that will only stop with a worldwide crash!

Anyway, this IBN short is a reasonably secure trade, as IBN is a $16 B market cap company, so not due to very sharp moves (at least not to the upside).

I'll continue holding IBN short.

[David Randolph]

IBN was up 3.8% in India overnight, but I guess that was just discounting what happened in Wall Street yesterday, since the stock closed 4.4% above the open on the American session.

I know IBN is a very large bank so probably not due to large moves, I'll need to be patient with it. I'll keep holding IBN short despite all the short term volatility, as the trend is now bearish and fundamentals tell me the stock is overvalued.

[David Randolph]

IBN's candlestick left on the chart wasn't bullish at all, as it went up to close a gap and retest a broken support, now resistance level. For as long as the stock closes below $40.78 (previous horizontal support, now horizontal resistance) the chart says it will go down.

There's also a descending trendline that will help me design a sound trading plan for this short position. I'll hold IBN short for as long as it closes below that trendline, today at $43.30.

[David Randolph]

I feel I don't know enough about IBN to have a strong bear hand on it. Sure, I think the Indian economy can have a recession, but I can be wrong. I'll have to let the market speak and take the loss or the profit it is willing to give me.

My take is the stock should at least have a 50% Fibonacci retracement from its previous bull run. That should take it down to $34, and I would close my short position with a profit there. If instead the stock rises and is able to close above the key $40.78 resistance level, there's nothing else to do but to assume the mistake and take the loss.

[David Randolph]

It was a close call yesterday, but I was able to keep IBN's short, because the stock closed below my key threshold, the $40.78 horizontal resistance level.

I'll keep yesterday's plan for today's session:

Hold IBN short if the stock is set to close below $40.78. Buy to cover if the stock is set to close above $40.78.

[David Randolph]

I'm still expecting IBN to have a perfectly normal correction to the 50% Fibonacci retracement level, which stands at $34, given the overvaluation of the company.

The risk of this trade is if the stock crosses above the key $40.78 resistance level on a closing basis. If that's the case I'll buy to cover with a small loss, limiting risk.

[David Randolph]

IBN continues to close below the $40.78 key resistance level, I'll continue holding the stock short, expecting it to have another leg down, probably to the 50% Fibonacci retracement level, standing at $34.

[David Randolph]

Nice 6% plunge on IBN yesterday. The trading plan is quite simple:

- Buy to cover IBN with a profit at the 50% Fibonacci retracement level, that is, $34.
- Buy to cover IBN with a loss if the stock is set to close above the horizontal resistance at $40.78.

[David Randolph]

I don't feel bearish on emerging markets or India anymore. I know IBN is overvalued, trading at 31 times 2006 earnings, but that isn't enough of a motive to be short the stock.

I fear India and China will have a booming period like the US, Japan and Germany for example had in the second half of the 20th Century. This booming period has been going on for years, but maybe it is still far away from over.

I know I had a plan, and I could remain focused on that plan, but I feel that instead of losing a negligible 2% on this trade I will instead lose 6 or 7%. I have to be flexible and change my mind when evidence points the other way.

The trading plan is:

Buy to cover IBN.

[Dracull]

This one I'm still holding, I believe that chart is promissing some more red moves.