Thursday, March 13, 2008

Big Bears


The crazy volatility on Wall Street continues today. 13 will prove to be either lucky, or unlucky. There is a crazy amount of activity on a very big company that most of you have heard of:
Bear Stearns
This stock was on a serious downward shot at the opening bell because of a several separate stories concerning Big Bear's cash flow and the fact that they are a creditor for Carlyle Capital.
This came from marketwatch.com
http://www.marketwatch.com/news/story/bear-stearns-slumps-concern-over/story.aspx?guid=%7B5CADA099-AEB3-44F1-BC26-61F48A08BBAC%7D

I've come to realize that the bear market rally with the majority of stocks we're seeing is a temporary phenomenon. High volume wasn't backing the activity on all of the stock trades the last two days, and without volume, you've got no solid ground. We will most likely see a correction.

I've been seeing a few stories this week about the open interest on put option contracts for Bear Stearns. It seems there is a seriously large amount of traders out there that believe this stock will be taking a serious dive within the next few weeks.
http://www.reuters.com/article/fundsFundsNews/idUSN1330507620080313

This is one of the occasions where 'jumping on the bandwagon' could be a very good thing. I looked at Stearns' price this morning, and noticed that volume (how many trades) at 9:30a (an hour after opening bell) had already climbed to DOUBLE what the normal volume is in an entire day!! Now, as I write this and check it, volume is 5X what average daily volume is for an entire day, and it's still two and a half hours before the closing bell rings. This is serious volume showing a ton of people betting serious money that Bear Stearns is in big trouble. I'm a wagon jumper today. There's a ton of evidence supporting some serious pain for Bear Stearns in the near future. We'll see what happens, but if the lemmings help me out on this one, I won't regret it.

CZ

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