Here’s the long and the short of the Equifax (EFX) trade. (September 11, 2017)
Let’s talk about shorting here. Equifax ( NYSE:EFX ); there is no other way to say it, the company basically ticked off anybody in this country who reads the newspapers and who has ever applied for a loan. Sergey, Vladimir, whoever else. Not to pick on the Russians but they got all your info. All of it. Social Security numbers, credit cards, the whole bit. Because this twit, Rick Smith, CEO of the company for twelve years has been using the same servers for the last ten.
Anyway, this guy took over in 2005. They are using 10-year-old servers with open source software. And from what I understand, though I will admit, I am not an authority on the subject, didn’t have a firewall. This is like felony stupid with a life sentence. Really, really stupid stuff. Anybody who is up on the case knows also that 143 million people’s data got swiped, now available on the dark web. What does Equifax ( NYSE:EFX ) do? They say, “Hey! We are really sorry about that. We are going to allow you, for free, to sign up for our, wait for it, trusted ID protection for a year.” And then of course you do this and what you are doing is, you are waving your rights to sue the company for damages.
I want to start cursing now but I am not going to because this is a family show. These guys are trying to get you every which way. Think about it this way, we are talking about shorting the stock here, 59 percent of the stock is owned by funds. How many fund managers do you think are going to be comfortable owning Equifax ( NYSE:EFX )? Particularly since their credit rating was just downgraded. This happened after hours, which is why the stock is down a little bit, not a lot, but it is down a little bit more after hours.
So, in my view, it goes without saying, this is a broken stock. I don’t want to get emotional about it because guess what? My info got ripped off too. I look at this stock and I will tell you this: If this breaks 110.00, which is below this low here in 2016, then this is really what you are looking at, a big massive reversal pattern here on a weekly chart. This is massive institutional distribution. I believe this goes a lot lower. I have already talked about this over the weekend, actually. And sure enough, here is the deal: It moved up a little bit and then started trading lower.
We have got a put position over on Option Market Mentor, I have got a pretty big short position on it, and this is what I want you to be doing if you haven’t traded this. I would expect this, even though the stock is trading down a little bit after hours, this stock went down over 8 percent today, I would expect there to be some short covering tomorrow, irrespective of all this. The reason is because stocks don’t move in a straight line forever. The steeper the straight line, either up or down, the more likely it is that you are going to get some kind of a snap hook, a move the other way. That could shake out some shorts and bring more buying.
What I would suggest doing, I would short this stock. I think this is going to be a great trade. And I think this pig is dropping below $100.00. I am not rooting for it to, although I am short the stock I am actually rooting for it to be $10.00. But what I am saying is, that is really what I am looking for. Look for a little bit of a rebound tomorrow. I would use the 15-minute chart, you could go tighter, a 5-minute or even a minute long chart but we really just kind of want to see what institutions are doing.
Look for this to move a little bit higher. But once it starts rolling over you can use the volume-weighted average price (VWAP) here or like a moving average, whatever you want to use, but look for this to stall. This is not moving higher. I could about guarantee you that the only way this is going to get up above 140.00 is if they do a reverse stock split. Wait for the short-covering to run its course. Once you see the stock start to roll over again I think you can short this stock again. I can’t remember the last time I have talked about shorting a stock that is down 20 percent in two days. So, look for a better entry than just shorting this thing into the sell-off, but do look to get short this stock for a longer-term trade.