A testing time for a trader; Short Fannie Mae; UK Billiton, Holding BHP Billiton
by, 21st-November-2007 at 05:51 AM (4362 Views)
I've been through a phase once where I almost got wiped out by over gearing and received a margin call, but this time I'm ready. This time I'm going short on things that are getting killed to hedge against falling markets. (God bless CFD's)
US Mortgage Stocks: There is no such thing as support and resistance for US Mortgage shares, as long as the bad news keeps piling on, the further the stock will plunge. I've shorted 100 shares of Fannie Mae (Federal Mortgage Association).
I followed legend Jim Rogers recommendation that FNM still has a lot of problems to sort, it may cut its dividend and its not fully revealed its mal-practices in accounting.
You may think "oh but that price is so low its a great buy" - its not! These things don't have money to go up, and take a look at Countrywide Financial.
BHP Billiton: I have a feeling the market will take BHP with it, unfortunately, however I do believe the fundamentals are very strong. I suggest if you don't have enough capital that you just hold on, on the other hand keep buying at critical support points.
If you can short the British/US ADR's of the stock so you can profit on the downside (which is what I've done).
Dow Jones: Many traders say the critical point is 12,800, I agree. However what does a critical point mean? Will it mean the Dow plunges to 12,800? It could suddenly stop at 12,400, consolidate for months and then charge to 15,000. So I think you have to use strict stop-losses.
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