A Good Time to Cover Bank of America

Bank of America (BAC) is down moderately since my initial short recommendation and I think now would be a good time to cover and take the gain off the table. I still think financial companies are going to see further weakness but they will most likely rally today when the Fed cuts interest rates. If the Fed cuts by a point, which I have a feeling is going to happen, financials could get a significant short term boost. Instead of holding through the volatility I think it would be wise just to cover.

If you shorted Bank of America when I gave my recommendation you are sitting on a 9.5% gain in just a couple of weeks. That is not an insignificant gain considering the short amount of time it took to obtain it. You could have made an even better gain shorting other financial companies when I gave my recommendation. If you shorted Bear Sterns (BSC) you would be sitting on a huge gain.

If you are a very short term trader and like to trade in and out of stocks, it may be wise to consider buying financial stocks today, especially if the Fed cuts by a point. If financials rally today I would trade the news but get out quickly.

Disclosure: I have no position in BAC, BSC, or any other financial company.

Comments

[Ames Tiedeman]

Some think BAC will be cutting its dividend. The same for WFC.