Diary of a Financier

Adding a Stop-Loss to Qwest Position

In Capital Markets on Fri 14 Jan 2011 at 11:50
  • Our Q position is reversing its short-term trend.
  • With the undercurrent of a falling Telecomm sector, I’m adding a stop-loss @ $7.25.

I still hold two positions that are remnants of the fading Telecom rally: Qwest (Q) & Comcast (CMCSA).  In both cases, I’m not willing to forfeit the gains from a blowoff top.  Yes, we’ve had substantial gains from both, but both are also buoyed by strong relative strength, which limits their risk in the interim.  I’m drawing a line in the sand when it comes to Q though: with support looming around $7.25, I’ve applied a stop-loss at that threshhold.

The latest leg of this broad market rally has risk-based assets going through the roof; characterized no better than in the outperformance of High Yield (HYG) and leveraged single-names like Q.  But unlike its Telecom compatriots, Q in not just leveraged to the hilt, but its balance sheet is stuck with substantial negative equity.

The charts tell the story.  First, the longer weekly trend is still bullish, but note the approaching violation of first support at $7.25:

Q weekly- bullish trend with first support violation

Further, having violated its trendlines already, the shorter daily chart echos that translation:

Q daily- trend reversal & key support @ $7.25

–Romeo

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