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New Short Plays

Countrywide Financial - CFC - close: 33.36 chg: -1.69 stop: 35.01

Company Description:
Founded in 1969, Countrywide Financial Corporation is a member of the S&P 500, Forbes 2000 and Fortune 500. Through its family of companies, Countrywide provides mortgage banking and diversified financial services. Mortgage banking businesses include loan production and loan servicing principally through Countrywide Home Loans, Inc., which originates, purchases, securitizes, sells, and services primarily prime-quality loans. Also included in Countrywide's mortgage banking segment is the LandSafe group of companies which provide loan closing services. Diversified financial services encompass banking, capital markets, insurance, and global operations, largely through the activities of Countrywide Bank, a division of Treasury Bank, N.A., a bank offering depository and home loan products; Countrywide Capital Markets, a mortgage-related investment banker; Balboa Life and Casualty Group, whose companies are national providers of property, life and casualty insurance; Balboa Reinsurance, a captive mortgage reinsurance company; and Global Home Loans, a U.K. mortgage banking joint venture in which Countrywide holds a majority interest. (source: company press release)

Why We Like It:
Mortgage giant Countrywide has been struggling the last few weeks or ever since it filled the gap from its October drop. Investors seem concerned over CFC's ability to maintain its profit margins. That's the reason Jefferies downgraded the stock this morning. Technically CFC has broken through its simple 200-dma and exponential 200-dma (as well as the $34.00 level) on very strong volume, which is normally consider a bearish development. The P&F chart is also bearish and currently points to a $22.00 target. We are suggesting shorts under the $34.00 level with a $30.50-30.35 target.


Picked on March 09 at $33.36
Change since picked: - 0.00
Earnings Date 02/02/05 (confirmed)
Average Daily Volume: 3.8 million


Energy Select Spdr - XLE - close: 43.33 chg: -1.23 stop: 45.15

Company Description:
The XLE is an investment trust or ETF focused on oil, gas and energy-related equipment or service companies.

Why We Like It:
Crude oil may have flirted with a new record high today but it looks like the rally in the oil stocks is finally beginning to crack. The OIX oil index broke down through the bottom of its narrow rising channel and closed under its simple 10-dma for the first time in weeks. The OSX oil services index also looks weak with a new MACD sell signal. We are long-term bullish on oil and oil stocks but stocks don't go up in a straight line. Even in a bullish trend there will be corrections. We want to try and capture part of the pull back or profit taking in the oil sector before investors decide to buy the dip. Speaking of buying the dip we'll be one of them and when it appears that the oil stocks have bounced we'll be looking for bullish positions. However, in the meantime the group is very overbought and today's action is ripe with bearish reversals across the sector. Instead of trying to choose just one oil stock to play we're suggesting that investors consider shorting the XLE. The XLE has been steadily climbing since the January lows where it bounced from its simple 100-dma. Now the XLE is breaking down through the bottom of its very narrow rising channel and its simple 10-dma. Today's move also produced a classic bearish engulfing candlestick pattern, or a bearish reversal pattern, on very strong volume that was almost four times the average. Technically the XLE has also produced a new MACD sell signal from very overbought levels. We're looking for a quick drop toward the $40.00 region.


Picked on March 09 at $43.33
Change since picked: - 0.00
Earnings Date 00/00/00 (unconfirmed)
Average Daily Volume: 4.1 million

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