Interesting Play: AIB Short

This morning I was looking for a nice short position to take since the index futures were all down and noticed that Ireland’s debt levels were downgraded by the S&P.  An Irish bank called Allied Irish Banks (AIB) lost 9% over the weekend on the news.  After looking into it a little further I noticed that the stochastic levels on the daily chart and the RSI levels both indicated AIB being strongly overbought.  The MACD line has yet to cross but looking at the historical data over the past few months the MACD has lagged on such moves.

I took a short position in the morning of $5.69 with a $6.02 stop just in case.  Looking at the fibonacci retracement levels AIB should go down to $4.75 for a 32% retracement and $4.23 for 50%.  Adding to the fact that the S&P has said it might downgrade Ireland’s debt rating further and that the price is set to dip under the $5.0 range which is a selling point for many mutual funds this looks like a nice position.

I’ll keep you posted on the developments.


4 Responses to Interesting Play: AIB Short

  1. clawmann says:

    If AIB announces a debt-back program, which could happen any time, it coud add in the range of 900 million Euros to its profits according to Goodbody’s. The stock coud easiy run through that $6.02 stop.

  2. applenickel says:

    True, but with talks of nationalization and possible further downgrades on Ireland’s debt there is some downside which could potentially push the price down to my target. I’m staying in my short position with my stop where it is. Both scenarios may come true.

  3. clawmann says:

    The fears of nationaization and the ireland debt downgrade were already priced into the shares, if not overly so.

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