Is It Over?
After suffering its largest point drop in history in Monday’s session (4,451.28 points, or 12%), Tokyo’s benchmark Nikkei 225 index closed up 10.23% in Tuesday’s session. That session was boosted by news of an emergency joint Bank of Japan/Ministry of Finance meeting Tuesday afternoon. Does that mean the crisis is over?
Maybe not. Historically, some of the largest one-day percentage gains in stock indices occur during bear markets. For example, on October 13, 2008, during the Global Financial Crisis, the S&P 500 surged by 11.58% in a single day.
What To Do Now
Remember our gameplan:
- Take advantage of down days to add long positions (recall we did that yesterday).
- Take advantage of up days to add short positions or hedge. As a reminder, you can download our iPhone hedging app here, or by aiming your iPhone camera at the QR code below.
Adding Short Positions
I have two short positions in mind now. One is an internet company which is scheduled to release earnings this week. I’m going to wait until I see those earnings before betting against that one. The second is a regional bank.
Betting Against A Weak Regional Bank
I found this regional bank using my Weak Regional Banks screen on Chartmill. The components of that screen:
- Has options
- GICS (Global Industry Classification Standard): Regional Banks
- Technical Rating: <=4
- Health Rating: <=2
- Piotroski F-Score Rating: <=2
The Technical and Health Ratings are on a scale of 0-to-10, with 0 being the worst; the Piotroski F-Score is on a scale of 0-to-9, with 0 being the worst. A score of 2 or lower suggests a stock is weak.
If you run that screen today, three regional banks meet all of those criteria. I already have short positions on two of them.
Waiting For This Bank To Bounce
The one I don’t have a short position on has a Health Rating of 1, a Technical Rating of 2, and an F-Score of 2. It also has Valuation Rating of 1. It released earnings last month, and missed on both top and bottom lines.
My plan was to bet against it on today’s market bounce, but that regional bank is actually down today. So I will bet against it on its next up day. If you would like a heads up when I do, feel free to subscribe to the Portfolio Armor trading Substack below.
If you’d like to stay in touch
You can scan for optimal hedges for individual securities, find our current top ten names, and create hedged portfolios on our website. You can also follow Portfolio Armor on X here, or become a free subscriber to our trading Substack using the link below (we’re using that for our occasional emails now).
