Everyone has been focused on the weakening technicals, the negative weight of bearish put activity and the headline risks of muni disruptions. What's been happening, though, through this period is the pattern of accumulation where hundreds of thousands of shares have possibly gone into the account of an unknown buyer, at least that is my assessment.
And the bearishness has not been confined to just the past five or six trading sessions either. In the two weeks ended 9-13 short sellers ramped up their selling by 1.4 million shares, from 12.2 million to a total of 13.6 as of mid-September. Given MBI's recent losing streak my guess is that these totals are probably higher. Someone had to make available the shares the buyer has just recently purchased, most of which occurred in the final hour, especially the last ten minutes.
Yes, very interesting price action. For five days, MBI has been coiling, making ever smaller moves up and down.
It should break out shortly. If support at $11 is breached on high volume, we will be in wave3 of the higher Wave3 (see previous posts). This is when price moves most sharply. So, if that happens, I'm calling for $9 or possibly $8 within a few weeks.
The bulls here can hope my interpretation is wrong ! GLTA.
I'm staying long. I'm thinking about two facts we all know: one, that the CEO said in the last conference call that National should begin to pay a dividend to MBIA starting in October, and two, that the vote by the Rescap creditors is to take place October 21st.
My view is that most of the put option action are traders opening put positions by selling, rather than buying. The reason being that the put premiums have swelled to the point that they offer a very attractive RoR (Rate of Return) for investors. Much higher than any bank, and the downside risk of having MBIA shares "put to them" is minimal.