Financial Sector: Beware LEH, CIT

Every day, we run a series of screens, large and midcap, buys & sells, breakouts and breakdowns.

Today, our Large Cap Sell Screen identified Lehman Brothers (LEH) as a Sell. It has a current master score of 33 (out of 100) and has an abysmal technical score of 17. It went to a sell signal back in March around $52, and two weeks later, traded as low as $20.25. It recovered somewhat, flipping to neutral around $44. 

Its now back on a sell signal, with a $20 price target. (See chart below)

The MidCap Sell Screen found a smaller financial: CIT Group (CIT). It also went on a Sell signal. Same set up as Lehman Brothers: First sell signal was in March about $16, fell to $6.45 a few weeks later, back to a neutral a month later.  Now, CIT is back on a Sell/Short rating, with a possible target about 30% lower.

Lehman Brothers (LEH) Six month daily

CIT Group (CIT) Six month daily

NOTE: Traders who short stocks should always work with stop losses. The
financial sector, with outside investors, have been very volatile, with
squeezes occurring regularly.

Regular FusionIQ posts can be found here.

What's been said:

Discussions found on the web:
  1. michael schumacher commented on Jun 3

    A little late on LEH don’t you think????

    if you didn’t short it into the last rise over 45 then I’m afraid you’ll just get stopped out on the next “capital injection news” (that they are repeatedly denying) I think most of them will continue to try to raise new money because if they do not they will collapse like a wet taco. The fed can’t keep doing the same thing to soak up all the bad choices they all have made. They may try……..


  2. John Borchers commented on Jun 3

    I agree with MS. The time to sell was weeks ago when it was clear it didn’t belong near $50.

    While I agree you wouldn’t buy it here you definately wouldn’t short it.

  3. Read: Ben Franklin commented on Jun 3

    Waiting for Dick Bove to show up somewhere today with a LEH, CIT “AGGRESSIVE BUY” call.

  4. UrbanDigs commented on Jun 3

    shorting here is a bit risky, but I am hearing some scary things on LEH…their balance sheet is quite ugly, and exposures quite risky. I mean, the just raised 6Bln a few months ago, and now they need another 4Bln…

    crisis of confidence could make LEH the next BSC. And C too..I think a new wave of write downs is not too far away in general. What happened to all this write up talk?

  5. michael schumacher commented on Jun 3

    >>Ask yourself which is the easier, more comfortable trade to make . . .>>

    I did and it was over 15 points ago…..


  6. Matt M. commented on Jun 3

    If your nervous being short LEH (which has been a must short since breakdown at $43) then get long a small basket of strong RS financials such as GS…AMTD…TROW… to take the sting out of a counter trend move. LEH is in big trouble…weakest of the weak (RS) in the land of the weak (BD’s).

  7. Donny commented on Jun 3


    Need I remind everyone that the LEH was out broadcasting last week that everything was okay and no more cash infusions were necessary. LoL

    I think these guys are more clueless than liars. They simply have little control over their balance sheet, and everyday presents a new peril. What’s the answer … further dilution for their shareholders.

  8. VennData commented on Jun 3

    Do those all-in-black ‘candids’ floating around of Lehman’s CFO symbolize the tint of the box she presides over?

    And which apostrophe-laden Arabian micro state’s “smart money” SWF has Hank Paulson beseeched to slide a little matchbook of their hard-earned sovereign wealth under the short leg of an unsteady LEH table?

    And why all you consumers are complaining about oil prices is beyond me. It’s all ending up as “capital” in the bank that issued you all your debt.

    And wouldn’t it be cool to know which tier, 1, 2 or 3 they got your debt in? Maybe their stylish CFO can tell you… or maybe not.

  9. Scott commented on Jun 3

    Rumor is Lehman is on the NYSE floor buying 500,000 shares. When they are done, however . . . .

  10. Chief Tomahawk commented on Jun 3

    Donny, you nailed it.

    I heard rumor floating 7-10 days ago LEH was in trouble*. I didn’t take a position then. But BR’s timing, er blogging, last time around on Bear Stearns was prescient. I suspect the LEH downward run is gathering steam.

    * I recommend reading Mike Morgan’s blog (I think it’s called Morgan Florida) for an insider’s view of the Florida real estate carnage. In one entry Morgan told a group of real estate investors better to liquidate now for $7 million (original purchase prices totaled $17 million) and go short the financials than to hold and wait for a turn around. Further, Morgan tells of banks/financial institutions routinely showing up to see what they’re holding as in many cases they don’t even know.

  11. JT commented on Jun 3

    Follow the plan and stick to the plan. If your strategy says short LEH, short it. It is not about the price, it is about the movement and the perception of directional change. I stick to commodities and energy in particular but Barry’s trigger is to sell so sell. The key is not getting into a trade anyway. It is getting out that matters.

  12. gianluca carrera commented on Jun 3

    surely with another 4bn$ share offer, LEH is an “easy” target… and I am not sure it is too late for financials too… sooner or later the market will stop taking bad news for good news…

  13. Kevin D commented on Jun 3

    You see all the put buying last friday? very BSC-ish.

    Open Interest at the time was 6k, 7k traded on Fri at 17.5 June strike — couple thousand in last half hour.

    Could be someone knew downgrade was pending, but that’s a pretty big bet — lots of different strikes too

  14. Beth commented on Jun 3

    From S&P call: During Q&A, David Einhorn from Greenlight Capital (who has been a vocal critic of LEH) asks about S&P’s work on LEH’s exposures and valuations, S&P says they go beyond the public disclosures and have had long conversations with the co. He asks how they would view a buyback; S&P Says they would be surprised if LEH was actively buying back stock, but notes that LEH does not have a capital issue at this time. Notes they raised capital and are possibly looking to raise more, which they don’t think would be used for the sole purpose of buying back stock.

  15. DonKei commented on Jun 3

    Yeah, but their CFO is hot. She had her picture on the front page of the Money & Investing section of the WSJ recently in a little black dress, heels and pearls.

    That’s gotta count for something, but maybe a contrarian something, n’cest pas?

  16. speculator commented on Jun 3

    There is heavy put buy in Leh. But I think it is very unlikely it will be another Bear Streans. I wonder what your screener says about FNM. I think it is a Short.

  17. blin commented on Jun 3

    Looks like scary place to short, although it all comes down to risk management and following the trend.

    Truth be told, it does look very BSC’ish.

  18. Kieth commented on Jun 3

    Bear Stearns imploded on their reckless investment in subprime
    mortgages. Now, as part of JP Morgan Chase they are well on their way
    to imploding their new company as well. Plymouth Park Tax Services aka
    Xspand aka… a subsidiary of Bear Stearns is in the midst of spending
    multiple BILLIONS of dollars on tax liens in multiple florida
    counties. If you think subprime mortgages were risky you should study
    up on tax liens… less in the most depressed real estate market
    in the country. This is a competetive business and Bear/Chase is
    using their new found free money from the fed to buy GARBAGE just to
    generate fees. If anyone is truly concerned please look into it. They
    are buying under PPTS and are well in the $1 billion + range. The
    collateral is C- at best. So……who is going to bail out JP Morgan

  19. zackattack commented on Jun 3

    The last several months, I’ve been using the double-short/double-long index products instead.

    Individual stocks are too easy to rumor around in this environment.

    No matter how absurd, a rumor that Buffett is interested in one of the monolines was good for a 15% move.

    But you aren’t going to wake up one morning to the rumor that he’s buying the Shanghai Composite.

    On the long side, you aren’t going to see XLF’s CEO doing the perpwalk in shackles before the open.

  20. Chris Noyes commented on Jun 3

    Barry I hope your right I’m 33000 shares naked short since low to mid 40’s. You can’t save them all and the fed already has it’s hands full.

  21. Aurora Borealis commented on Jun 3

    You have to remember that there is always the 2$-FED-bid…

  22. The Big Picture commented on Jun 30

    Lehman Brothers $20 Price Target Complete

    In the beginning of June, I noted that Lehman Brothers (LEH) was reiterating a sell signal on the Fusion IQ ranking system. So too was CIT Group (CIT). Lehman closed at $19.81, and is now at an eight year low on Take-under speculation. CIT is $6.81, ab…

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